Question on 2% rule of thumb mentioned in podcasts.

[Red Peterson]

Heard it more than once in podcasts that a good rule of thumb is getting a property rented out for 2% of the purchase price. Question: which market is this applicable? Is this only on certain states and expensive properties? Has anyone been able to get like $2k rent from a 100k property or something similar in this price range? Thank you in advance for all inputs.😊

[John Lee]

Being in Southern California, there is almost no chance you will come close to the 2% rule, especially for a SFH. This rule is far more likely to be achieved on a $30k house (requires only $600/month rent). There are a lot of places in the US that have houses like this, but many are in C or D neighborhoods. A lot of out-of-state turnkey companies get close to this 2% rule, but the risks are higher (vacancies, unexpected repairs/damages, evictions).

I've seen it often stated as the 1% rule in many areas, especially in better neighborhoods. However, in SoCal, you still only achieve that 1% rule in multi-families, not in a SFR.