Need your opinion - 50% rule

[Carlos Lopez]

I'm new at real estate investment and have been reading everything I can on investing properties, specially at Bigger pockets. My goal is long term investment. Buy and hold. Being so new I would the more experienced opinion of the wiser BiggerPockets community.

Here is my dilemma:

I live in Northern California where house prices have hardly dropped and my community has currently 1 house below the $400,000 price.
We are near a University and the rental market is always busy.

I'm currently looking at two houses.
A Duplex that rents for a total 1700 / month
A Fourplex with rents that total 3950 /month

The duplex, I'm thinking of offering 215k bank wants minimum 235k

Fourplex I was thinking of offering 400k Banks wants 465k

At these prices my calculations don't seem to cover the 50% rule.
I'm doing FHA or Conventional with only %5 down.

Doing my calculations, at the prices they are asking I don't even get a Cap Rate of 6% or the 1% rule.

What do you guys think? Houses are so expensive in this area and this makes it difficult to negotiate using comps.

I'll appreciate your input.

[Joel Owens]

Carlos certain parts of California and New York for example are appreciation driven.

Meaning some wealthy people care little about the cash flow but rising annual rents and appreciation on the back end and to cut their taxes with depreciation.

In those speculative markets you might not even find anything close to the 50% rule. You then have to decide to buy in your market for an appreciation play or go outside your market where the cash flow is better.

Nobody is going to sell to you for less when buyers are paying 5 to 6 caps or less for properties in those areas.

There are areas with appreciation only, some cash flow and appreciation, and those with mainly big cash flow but little to zero appreciation over time. You have to decide where you want to deploy your capital and the strategy based on not what you WANT in your local market or elsewhere but what properties are actually SELLING FOR.

Hope it helps.