I'm really confused about the 2% rule.

[Dominic Bailey]

I have a property that I am looking to rent out very soon. I purchased the property when it was $208k. I did some work on it and now it's valued at 237k. I plan on renting it out for about $1,900 a month which is the going range for the area. However according to the 2% rule, I'm not making any positive cash flow. Is my math right or am I doing something wrong?

[Taylor L.]

The 2% and 1% 'rules' aren't really rules. They're very high level screening criteria to determine whether an investment is likely to cash flow or not, but the real key is to dig deeper. You already know this property and should have a good feel for monthly costs. If you take that into account, what do you come up with? Be sure to factor in repairs and vacancy.

[Joe Villeneuve]

The 1% and 2% rules should be left where they belong...on milk cartons.

[Chris Momongan]

I use the 1% rule when looking for deals.  I'll go on Zillow and pull up rentals for 2b1b for the area.  If they go for 1k-1.5k, I'll screen for comp houses 150k or less.  Out of the ones I like, I'll then when my calculations to see if it cash flows.  I try to be conservative and consider every possible expense and include that in my calculations.  Insurance, vacancy, taxes, cap expenditure, property management, and whatever else you can think of.  I like to be cash flowing $200 or more after all considerations.

[Nathan Gesner]

Quote from @Dominic Bailey:

I have a property that I am looking to rent out very soon. I purchased the property when it was $208k. I did some work on it and now it's valued at 237k. I plan on renting it out for about $1,900 a month which is the going range for the area. However according to the 2% rule, I'm not making any positive cash flow. Is my math right or am I doing something wrong?

The 1% and 2% rules are filters, not formulas for success. Stop using them until you understand them.

Use the BP calculator to evaluate the property for cash flow. That's a better indicator of how you'll do. Based on what little you've shared, I think you'll be just fine.

[Jaron Walling]

Quote from @Joe Villeneuve:

The 1% and 2% rules should be left where they belong...on milk cartons.

 Oh my god... hahaha this got me good this morning. 

[Drew Sygit]

@Dominic Bailey both the 2& and 1% "rules" are really just:

1) Guides for newbies that don't know any better

2) Ways to efficiently (but necessarily accurately) filter through volumes of potential properties.

[Joe Villeneuve]

Quote from @Drew Sygit:

@Dominic Bailey both the 2& and 1% "rules" are really just:

1) Guides for newbies that don't know any better

2) Ways to efficiently (but necessarily accurately) filter through volumes of potential properties.

...or...
1)  Misleading guides for Newbies that if they use them will never know any better,
2)  Lazy ways to inefficiently (and totally unnecessarily inaccurate) filter through any number, large or small, of properties.