The two percent rule in real estate is valid if you earn two percent of your total investment value monthly from your rental property. The important point here is that the rental income you will receive will generate a positive cash flow. But is it enough to meet the 2 percent rule for this investment to be profitable? The gain you will make in this method can be applied if it still makes a profit after deducting expenses such as income tax and insurance fees. Let’s examine the 2% rule in real estate in detail.
Is the 2% Rule Profitable in Investments?
In simple logic, if you invest $100.00 and earn $2,000 a month from real estate, you meet the 2% rule. But investing under the 2 percent rule can be misleading. For example, in a region with a high property tax, you may not be able to make a profit if you invest only according to the 2 percent rule. For this reason, the choice of the region is important. If you want to invest in your property in a region where the winter months are long and harsh, it may require constant maintenance and renovation. These extra costs can reduce your profit from the 2% rule or even be more costly. In such areas, it may also be possible to keep your property vacant for a certain period. If the vacancy rate is more than 2%, you can lose money from this investment.
What are the Supporting Factors for Rule 2%?
The 2% rule in real estate aims for positive cash flow in the short term. However, in the long run, you should not lose sight of some tips for valuing your property or making the most of the 2% rule. These tips are as follows:
The growth of the region: Building new homes in the area and increasing the population can increase house prices.
Those within walking distance: Buildings such as grocery stores, schools, restaurants, and hospitals within walking distance of your real estate increase the value of your property.
Proximity to Nature: The value of houses near natural parks and green spaces increases.
As you can see, the 2% rule is a method that can bring you profit by combining many different factors. In the investment, adhering to the 2% rule may not always bring you profits. You can contact Trem Global, which meets all your needs with its wide portfolio and expert investment advisors and get the additional information.