The idea behind the 2% rule is if a property generates gross monthly rent of 2% of the purchase price,
it's almost certain to generate enough money to cover its expenses as well as provide
cushion for vacancies and unexpected maintenance.
However, it can be difficult to find properties that conform to the 2% rule in practice,
unless you're buying a very distressed property or the real estate market is extremely weak.
In fact, the 2% rule is simply a more extreme variant of the 1% rule,
which is the more common rule used in rental property investing
to identify properties that will produce enough positive cash flow.
The 2% rule is a guideline often used in real estate investing to find the
most profitable rental properties to buy. The idea is to only buy properties
that produce monthly rent of at least 2% of the purchase price.
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