Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Real Estate Deal Analysis & Advice
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 7 years ago,

User Stats

27
Posts
12
Votes
Nicholas Bailey
  • Chicago, IL
12
Votes |
27
Posts

50% Rule/ 2% Rule in expensive areas -> is my reasoning correct?

Nicholas Bailey
  • Chicago, IL
Posted

I'm looking at properties in Chicago and these rules of thumb are basically impossible.  I've been listening to the podcasts and reading about the deals, and the numbers are always for these cheap areas, whereas I'm looking at reasonably good neighborhoods in Chicago.

My thinking is that while the property values will be much higher in Chicago, the rent won't be similarly higher (i.e. I can get 800/month rent on a $50,000 house in Texas, but there's no way I'm getting 8,000/month rent on the typical $500,000 property in Chicago, with 4,000 or so being more normal).  I doubt this means nobody is making money in Chicago rentals.

My thinking is this:  the 50% rule might mean I can expect 400/month in expenses in Texas, but I'm not going to see $2,000/month in expenses in Chicago.  Fixing the same number of toilets isn't going to be proportionally more expensive, so that kind of expense will be lower as a proportion of the real estate value/gross rent.

Am I on the right track here?

Loading replies...