Getting to 2%

[Jason Holden]

Hey all, I'm new here and am just beginning to research real estate investing as a landlord.

I've heard about the 2% rule and the 50% rule. 50% is golden, I get it. Count on a rental to be a lot of work. The 2% rule I'm fuzzy on.

According to what I've read, if I'm looking to purchase a home for the purposes of fixing it up and renting it, I need to make sure I can charge 2% of the home's value in rent. In the Dallas market - one of the lowest-priced house markets in the U.S. from what I understand - that would translate to buying a home for less than half of what the homes around it cost. Example:

Average home price in upscale neighborhood: $270k

Average rent in upscale neighborhood: $1,800/mo

Max home worth per the 2% rule: $90k

After searching online over the past couple of weeks (Zillow, Redfin, etc) I've found 2 homes listed below 90k, but I could expect *maybe* 1200/mo max in rent.

What am I missing? Is this a bad market? A bad time to become a landlord? Do good deals only come along once every few months? Are there better ways to search I'm not aware of?

Also, do I factor in the cost of making the home liveable into the equation (i.e. does rent need to be 2% of [purchase price + repairs])?

Thanks.