Two Percent Rule

Does monthly rent equal or exceed 2% of purchase price?

Example Result

Sample Data

0.74%

Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.

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Two Percent Rule Formula

Monthly Rent / Purchase Price >= 2%

$2,850 / $385,000 >= 2%

0.74%

What This Means

A sample property priced at $385,000 with $2,850/month rent has a two percent rule of 0.74%. The 2% rule identifies exceptional cash flow opportunities. However, properties meeting this threshold are typically in lower-value markets or neighborhoods, which may come with higher vacancy, maintenance, and management challenges.

Where This Value Comes From

Two Percent Rule is not entered directly — it is calculated from Monthly Rent and Purchase Price. See the formula breakdown above and the detailed inputs below.

Calculated From

Two Percent Rule is calculated using these inputs:

Monthly Rent

The gross monthly rental income collected from tenants.

Found on your lease agreement

$2,850

Purchase Price

The agreed-upon price to acquire the property.

Found on your purchase contract / hud-1

$385,000

Why It Matters

The 2% rule identifies exceptional cash flow opportunities. However, properties meeting this threshold are typically in lower-value markets or neighborhoods, which may come with higher vacancy, maintenance, and management challenges.

Detailed Explanation

The Two Percent Rule is a more aggressive version of the 1% rule. Properties meeting this threshold typically generate strong cash flow but are rare in most markets and may carry higher risk.

Discussion

Same consideration as One Percent Rule — showing the actual percentage rather than True/False would let investors see how close (or far) they are from meeting this aggressive screening threshold.