2 % is the thumb rule by which any investor in real estate can understand and find out the rent when compared to the price ratio. It is a common practice for the measurement of the rents where the calculation stands beneficial if it is equal to 2 % or more than it, but below is not recommended.
For the last few years, the real estate industry has become one of the booming industry. Depending on the business dealing with purchasing properties the thumb rule has been introduced which makes the deal calculation easier. While specific rule fro the rented properties has made explaining and understanding on both sides accurate and trustworthy.
Categories and benefits for the investors
- This thumb rule is best for the investors who are new in the rental property dealing and have less money to spend on maintenance. Requires fewer cash flows and can provide a better return as the tenants. Real Estate investors are in both residential and commercial sectors, but in order to save a good amount, it becomes important that the maintenance is effectively checked before hiring the space.
- Most of the time while finding property has become difficult on 1 percent, it does not exist because of the sudden cash flows, is observed on unplanned amenities of the spaces. But the 2% thumb rule has made a difference and increased the value of the rental property. Mostly low-cost properties are set on values for the investors who will buy them at an affordable rate.
- The cash flow can be guessed at the beginning when you are up to invest in the property, so if you are looking for prices on rent, by properly visualizing the area and making a list of the cash flow one can step forward as an investor.
- Though the 2 percent thumb rule is applicable in all sectors in real estates for the investors few from certain areas do not gain much profit. Whom can you blame for the loss? Mostly the causes of the loss are the uses of the spaces in seasonal times. So, space is rented for a certain period and after which the place is vacant. Investors are mostly at a major loss when the rented area is not used round the year.
- In these seasonal sectors of real estate, the price rate cannot work on the thumb rule and so it becomes a high rated demand than the considered rule. But in cases of high-cost properties, the requirements and benefits differ. The 2 percent thumb rule for the large and useful properties on rent has the best impact from the thumb rule.
The price of the maintenance matters a lot, generally when it is maintained by the investors the expenditure on the maintenance causes a huge difference in earning the profits after paying the electrical bills and other factors involved in expenditure. But in cheaper rented property areas the maintenance may be of same costing or more but will not provide a huge benefit as prior.