To determine whether a property is a good investment using the 2 per cent rule, simply multiply its purchase price by 0.02.įor example, if you're going to purchase a property valued at $200,000 then the monthly rent should be at 4,000 or more to meet the parameters of the 2 per cent rule.įirst of all, we must clarify that the 2 per cent rule is not strictly a "rule" that you cannot break and is infallible. It is widely considered that this rule of thumb will help you make a decent return on your investment property after factoring in your expenses for property taxes, insurance, maintenance, property manager, and mortgage.Īccording to the rule, a rental income of less than 2 per cent of the purchase price would suggest that the asset isn't worth buying. The idea is that if a property generates a gross monthly rent of 2 per cent or more of the purchase price, it's considered as a "good investment". The main idea is to only buy properties that produce monthly rent of at least 2 per cent of the purchase price. The 2 per cent rule, also stylised as "2% rule", is a rule of thumb that is used as a screening guideline for determining how much you should pay to buy a rental property. In this article, we take a closer look at the 2 per cent rule and if it can be practically applied in real life. While most of these rules are indeed very useful and can help investors avoid negative cash flow properties, low occupancy rates, and other risks in real estate.īut how foolproof are these percent rules? Are they feasible or should be completely disregarded as an idealistic concept? There's plenty of percentage rules floating about there's the 50 per cent rule, 70 per cent rule and the infamous 1 per cent rule. You may have heard about the different "rules" in real estate investing. What is the 2 percent rule in real estate? We look at how this investing guideline works, and how it can be practically applied in real life. Property Depreciation (Year 1 estimate)įrom this data, the ANNUAL and WEEKLY cash flow BEFORE and AFTER tax benefits are displayed as well as projected Capital Growth based on The Cameron Bird Group’s research.What is the 2 per cent rule in real estate investing? Transfer and Mortgage Registration Feesġ4. Cost of Furniture Package / Depreciation Schedule / Valuationsħ. Yes! 14 data points are all that are required to be entered into our investment property calculator (that are unique to each investor and their potential real estate investment purchase)Ģ. You will receive access to our in-depth investment property results which on average, is only about 9-12 recommendations per year.ĭoes the investment property calculator take into account all tax deductions and expenses? Our investment property calculator is free, absolutely FREE. We repeat, our investment property calculator is absolutely FREE. How much does the investment property calculate cost? We stand behind our claim that our investment property calculator that we have created is the best investment property calculator in Australia. At the end of inputting, the investment property calculator will display the BEFORE and AFTER tax net results. There are a small number of input fields required which are unique to each investor and their potential real estate purchase. The investment property calculator is an excel spreadsheet with a file extension of. What format is the investment property calculator software in? We have developed this investment property calculator to take into account the different tax rates of an SMSF purchase and the different setup costs that occur with an SMSF purchase. An SMSF purchase cash flow differs greatly to a standard property purchase. From the setup of the bare trust to concessional contributions to super after the purchase. Yes! We also have an SMSF Cash Flow Analyser that works in the same manner but for Self Managed Super Fund Property Purchasers. Can the investment property calculator be used on any real estate investment purchase in Australia?
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