2 Percent Test - 2020

[Jamelle Messinger]

Now I know that this test is just a ball park number and should be taken with a grain of salt, but in the book, "Rental Property Investing" by Brandon Turner, he gives an example on a $300,000 home with the rental income at $2,000 per month. He says when you take the purchase price and divide that by the rental income, you get 1.5%, so you would pass the 1.5% rule.

I've ran this calculation multiple times now thinking I'm just crazy but 2000/300000 does not = 1.5% it's 0.67%.

Can anyone explain to me how he gets this number? Maybe it's an error in the audio book (which is what I have) or the book itself?

[Marcus Auerbach]

Your math is correct, must be a typo. 200,000 home with 3,000 rent is 1.5%.

In todays market 1% is pretty much where it's at.