%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.

[J Scott]

Alex -

That's like walking into a Chinese restaurant, looking at the menu, and saying, "Hamburgers don't exist!" :-)

Just like in that example, the problem is, you're not looking in the right place. There are some places where you can generally find properties that will meet the 2% rule and there are other places where you won't find any properties that meet that rule.

And just like when you walk into that Chinese restaurant looking for a hamburger, your options are to find someplace else to eat or to just suck it up and find the best thing you can on the menu. In this case, you can either find a new investing location that does allow you to meet the 2% rule or you can choose to stick in your location and find the best deals available.

Crazy analogy, but I'm hungry right now, and I can't decide what to eat... :-)