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Updated over 7 years ago,
2% Question for Rental Properties
Hi All! I'm new to REI and I'm trying to understand a few basics. I keep hearing that 2% ROI is the goal. So, when I'm analyzing, that's exactly what I'm looking for. However, I'm not sure if I fully understand. Does the 2% rule apply to the total purchase price of the property? Or does it apply to what I put down? For example, I'm looking at a property that's $130,000. I'm putting down $8,000 on a FHA @ 3.875%. I'm trying to determine how much I should rent the property for in order to make a 2% cash on cash ROI. With these numbers, does it mean I have to rent it for at least $2600 ($130,000/.02) in order to make a 2% ROI? Can someone please clarify? If this is correct, than I actually need to earn at least $2600 in order to make a 2% ROI? Is that right? Can someone please clarify? Thanks!