Two Percent Rule Real Estate Calculator

What is the Two Percent Rule?

The Two Percent Rule is a simple real estate investment metric that suggests a rental property is potentially profitable if its monthly rent is at least 2% of its purchase price. For example, a $100,000 property should generate at least $2,000 in monthly rent to satisfy this rule.

How to Use This Calculator

1. Enter the purchase price of the property in the first field.
2. Enter the expected monthly rent (what you plan to charge tenants).
3. Adjust the vacancy rate (typically 5-10% in most markets).
4. Click the "Calculate" button to see the results.

Interpreting Results

• Annual Rent: The total rent collected in a year before accounting for vacancies.
• Annual Property Cost: 2% of the purchase price, representing the minimum annual return you should aim for according to the rule.
• Annual Profitability: The actual annual profit or loss after accounting for the vacancy rate.
• Does it meet the Two Percent Rule?: Indicates whether the property meets the basic profitability threshold.

Important Considerations

The Two Percent Rule is a simplified guideline and doesn't account for other expenses such as property taxes, insurance, maintenance, management fees, and potential appreciation or depreciation. It serves as a quick screening tool rather than a comprehensive investment analysis.

For more detailed analysis, consider using additional metrics like the Cash Flow Analysis, Cash-on-Cash Return, and Capitalization Rate (Cap Rate).