Where are you finding 2% deals

Question

That are not in a war zone? My area 130K 3/2 house rents for 1000-1100 per month max.

Account Closed · Answer

David Krulac  A title flaw that only you could solve?  Do tell!  That sounds like something I would say.  So what was this title flaw?

Steven Hamilton II · Answer

I have one that rents for $1,200 that I bought for 23k plus 5k of rehab.

Gross Schedule Rent 14,400
50% rule                  -7,200
Profit                         7,200
Purchase + rehab      28,000
~ROI                        25.7%

-Steven

Michael Seeker · Answer

There are a few pockets around my area that I wouldn't consider "war zone" but would meet the 2% rule if you dig hard enough.  I wouldn't consider these nice areas and would not particularly want to spend time driving to/from them for showings or deal with the type of tenants that they attract.  There is also very little possibility of appreciation in these areas.

A lot of people will tell you to stick to the 2% rule, but I've found success looking closer to 1% (which is the going rate in my preferred investment area).  The benefit is almost 0% vacancy, no late/non payments and a lot of room for appreciation.

What I typically do is find a distressed property in these areas that has a lot of potential for rent increase and appreciation (with some post-purchase investment).

You have to decide what your comfort zone is, for a lot of people (myself included) that doesn't generally fall into the areas where the 2% rule works.

Steven Hamilton II · Answer

Jon Klaus,

Yes, I see them all the time.  Wish I had more cash to purchase more.

Savannah Leigh · Answer

I can do rents of 650 or so on a unit cost of.  15k all day everywhere in my area.  Sometimes up to 850/20

David Krulac · Answer

there were 3 mortgages wiped out in foreclosure, but I held the tax lien, not wiped out in foreclosure. (Chapter 32)

David Krulac · Answer

long story short it was a foreclosure, under contract to a new buyer for $200,000, who could not settle because of a title flaw that only I could solve.  The house was worth about $330,000, so the rent is not out of line with the value.

David Krulac · Answer

@Bill W

I for one don't buy warzone either.  The 2% rule is only comparing cashflow to price, and does not consider other factors such as appreciation for one.   If you want to forego appreciation, 1 thing that you could do would be to invest in areas with little to no growth.  Around here when you get say 50 miles outside of the metro area, beyond where many people want to commute, the house prices are lower.  You might be able to pick up a house for say $20K that rents for $450/mo.

In one such area I was talking with a real estate auctioner. who told me that he graduated from high school in that area in 1964 and that the number in graduating class then was the same as today.  What that tells me is that this has not been a growth area for at least the last 50 years.  But people still live there, and some people even work there, but many of the young people move away.

Besides area another way to acquire favorable return properties is not follow the pack.  Find a niche that works for you that not everybody else is doing.  I've bought many properties that were not for sale, not listed, not advertised, and the seller was not trying to sell.  One niche property that I bought was not listed, no sign on the property, and was actually under contract to somebody else for almost 7 times more than I paid.  It was a 12 year old house under contract for $200,000.  I paid $30,000 and the first tenant paid $2,050 a month in rent.

Another property that I bought the seller financed 100%, property as not listed, not for sale, & not advertised.  i was the only person that knew it was for sale.

Another property has a life estate tenant in the property.  Under the LE, the tenant paid no rent for as long as they were alive.  I was a listed property, but nobody wanted to buy it, except of course me.  It was one of the most lucrative deals I ever made, and nobody else wanted it, and there were no other offers even though listed for sale.

Mike H. · Answer

I think 2% is tough but I think you can still make money as an investor at the lesser numbers. Just need more of em is all.

I tend to look for deals that will give you a profit of about $350 to $400 a month before vacancies and repairs - assuming no money into the deal. If you're putting money in, then you should be adding an additional $50 a month in income for every 10k you're putting in.

But if its a nice house in a nice area and the numbers aren't working, then I don't see any reason why you shouldn't put in 10 or 15k to get to that minimum 350 to 400 a month number so you can take it down.  I look at it as one more house in the portfolio that will be contributing to my overall income and net worth.

To me, the end goal is to get as many houses as I possibly can that can give me that 350 to 400 a month number. The nicer the house and nicer the area, well, even better.

Where are you finding 2% deals

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