2% Rule in Chicago?

[Travis Russell]

I am VERY late to the game on this one, but does the 2% rule actually work in Chicago in A and B neighborhoods?? If I understand correctly, a $300k property should rent for $6,000/month? This sounds like high rent for even somewhere like NYC (where the purchase price would be $1.4M!!) What am I missing?

[Josh Sexton]

The 2% rule definitely doesn't work in Chicago (or many other major metros).

For some areas, the Section 8 cap rate is usually a good guideline to follow. It is tough to get more because there isn't a great market rate tenant base. Depending on the home and the area, this might be at or slightly above 1%. We rent just over 200 homes, most of which are on the south side, and they all rent around 1% of the ARV give or take.

For those A and B areas you're lucky if you can get 1%. Unfortunately, you're stuck with what the market will support and trying to price it at 2% is unrealistic.