Questions about the 2% rule!

[Christian Kim]

Hello, fellow investor!

Quick question. How accurate is the 2% rule? I'm analyzing properties and they're no where near 2% but it seems to cash flow well when I analyze it. I'm worried I'm doing it wrong.

[Andrew Freed]

@Christian Kim - I believe that is one of the biggest misconceptions when it comes to new investors. Each area you invest in is different from what the average percentage rule is. For instance, I am looking in Austin TX and I'd be lucky if I get .75% rule from those properties. A good rule of thumb when it comes to markets is to think of it as a scale. When a market has high appreciation likelihood, it tends to have lower cash flow or percent rule. And visa versa, when the market has low appreciation likelihood, it has higher cash flow or percent rule. I think that was a long way of saying that you have to use this rule geographically depending on the market or you are comparing "apples to oranges".