2 percent rule southern utah

[Eric Mitchell]

I have a question about the 2 percent rule. This rule seems good but a little unrealistic. I'm sure this is possible in some parts of the country but here in southern Utah that seems a bit high. Does anyone have properties in St George, Utah where you are able to get this kind of rent? I'm looking at 3 bed 2 bath single family homes where prices range from 200K to 250K. This means I will need to collect $4,000 - $5,000 in rent which is unheard of here. There are a few homes in the $100K range but they are renting for around $800 - $900 which is well below the 2 percent rule.  

[Jason Hendrickson]

If it were me I'd sell your duplex while the market in St George is strong (and assuming you can come out ahead), increase your knowledge of real estate investing, determine if it's really for you, and *then* get back into the game (but not in St George). However, I say that with one HUGE caveat: DO NOT BUY REAL ESTATE OUT OF STATE until you ABSOLUTELY know what you're doing. Given your current situation you are a ways off from that. Buying investment real estate before you know what you're doing is a miserable way to gain knowledge and a good way to lose money. 

That said, if you *can* raise your rent to $1,600/mo then do it yesterday. Unless you have a 4 bedroom duplex I'd be surprised you could get $1,600 in St George, at least not without a month or two of vacancy that would all but eliminate any upside to your rent increase for a couple years. 

Lastly, if $1,600 *is* a legitimate market rate for your duplex and you don't have the heart to ask for it then you absolutely need to sell your rental and move onto another avenue for investing. You're here to make money, not do favors for strangers (no matter how nice they might be). If you're contemplating hiring a PM solely to have someone do the dirty work, that's totally fine, just understand you're paying a 10-12% premium (and likely a placement fee of of 1/2 to 1 full month's rent every time the PM places a new tenant) and you need to adjust your financials accordingly.

Sorry for the strong medicine, but hopefully it'll save you some money and headache down the road.