%2 rental rule does not work

[Alex R.]

I am looking up some houses to fix and hold (rent) and I am doing some analysis, but there is absolutely no way to get a deal which fits the %2 rule.

Here is an example:

http://www.zillow.com/homedetails/2911-Nelson-St-Bakersfield-CA-93305/18892546_zpid/

This is a foreclosed property selling for $109,500. Let’s say you put an offer of 95 K and you are lucky enough to have it accepted.

2% of 95k = $1900

That is a far stretch from Average $900 - $1100 rent for similar houses in that neighborhood.

Or we can do the match another way: Let’s say we already have someone who has the money and wants to rent this place for $ 1100

In order to make the 2% rule work, our offer should be $55,000 (compared to the seller asking price of 109k) this offer doesn’t stand a chance.