Underwrite
2 percent rule calculator for rental property
The 2% rule is the 1% rule with less patience: monthly rent should be about 2% of price (or all-in cost). Pass is rare in high-cost markets and usually means cash-flow hunting territory, not a guaranteed win. Fail is normal on the coasts - still run cash flow if strategy differs.
Assumptions
Returns stack
- Rent / price
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- Rent needed for 2%
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When to use
Hunting deep cash-flow markets; teaching why 1% passes can still be thin; filtering wholesaler lists that claim "great rents."
When not to
Most primary markets fail 2% - don't treat fail as "never buy." And passing 2% with rotten expenses can still lose.
Assumptions: Monthly rent-to-price % = monthly rent ÷ purchase price. Pass if monthly rent ≥ 2% of price. Optional all-in denominator includes rehab.
Worked examples
Input
Price $150,000 Rent $3,000/mo
Output
Rent-to-price 2.00% - passes
Clears the 2% hurdle - still need real OpEx and debt math.
Input
Price $150,000 Rent $2,200/mo
Output
Rent-to-price 1.47% - fails 2%
May still pass 1% - different filter, different bar.
Common traps
- Most primary markets fail 2% - don't treat fail as "never buy."
- Passing 2% with rotten expenses can still lose.
- Gross rent is not collected rent.