How important is the 2% rule?

[Dustin Dummer]

Listening to Podcast and reading all the investment books from the real estate god's talk about the 2%. However it seems like those type investments with low purchase prices are difficult for new investors to pull off. I can see where wholesaler's might run across these opportunities or if I want to wait until that type of deal eventually comes along, but I don't want to wait. I want to make things happen. I've been running numbers on properties: I can see deals with $100 or more per month/per unit, greater than 12% ROI but a 1.29%-1.4% Income-Expense ratio. So how important is the 2% rule? If someone can drop some knowledge on this topic it would be greatly appreciated.

[Bob Okenwa]

@Dustin Dummer

The 2% rule, 1% rule, 70% rule, etc. are all rules of thumb to help investors stay out of trouble by keeping their numbers conservative and allowing for a larger margin on profit. As the market changes at the national and local level, these "rules" may become unrealistic and your 70% becomes 80% or 2% becomes 1.5% and so on. In some markets, these rules are not achievable and you'd have to due your due diligence very well and make sure the numbers you get match an acceptable profit margin for your project. If you try and hold out for these rules, you may miss some good opportunities along the way.