Multifamily 2% Rule Screening Calculator
The 2% rule is a quick screening test: monthly gross rent should equal 2% or more of the purchase price. A duplex selling for $200K should generate $4K/mo gross rent to pass. The rule is aggressive in 2026 markets — most A-class metros yield 0.5-1%. The 2% rule typically signals C-class or distressed property in tertiary markets.
Origin of the 2% Rule
Coined by real estate investors in early 2000s when interest rates were 6-8% and cap rates 9-12%. Math: 2% monthly rent × 12 months = 24% annual gross, minus ~50% opex = 12% net yield. That covered debt service plus profit at then-prevailing rates. In 2026 with rates 6-7% and cap rates 5-7%, the 2% rule is essentially impossible in primary metros — but still achievable in tertiary markets, distressed property, and mobile home parks.
Why 1% Is More Realistic Now
Most B-class multifamily in mid-tier metros yields 0.8-1.2% rent/price ratio in 2026. A-class urban yields 0.5-0.8% — buyers betting on appreciation. The 1% rule is the modern equivalent of the 2% rule: passable cash flow but not exceptional. Combine with vacancy, opex, debt service to compute true cash-on-cash return.
When to Use Either Rule
Use 2% rule for: rural cash flow hunters, mobile home park screening, distressed urban infill. Use 1% rule for: small multifamily under $1M, tertiary metros, BRRRR strategy. Use neither for: A-class urban, vacation rentals (use ADR analysis instead), commercial properties (use cap rate directly). Rules are screening tools — always verify with NOI + cap rate before LOI.
Source: BiggerPockets Real Estate Investing Forum data, CoStar Group 2025 Multifamily Cap Rate Report. Last updated: May 2026.