Buying and owning real estate can be lucrative, but it requires a careful strategy and a thorough understanding of the market. Many factors come into play, and it pays to know the ins and outs of real estate before you start investing. After all, knowledge is the new currency. And generating positive cash flow is often a critical objective.

Here are some real estate percentage rules you may encounter while learning about real estate investing. These percentages serve more as guidelines than strict rules that investors must follow. Consult your financial advisor on using the percentage rules mentioned here to secure your financial independence as a real estate investor.

WHAT IS THE 2% RULE IN REAL ESTATE INVESTING?

This rule refers to the principle that investors should only purchase properties that yield a monthly rent of at least 2% of the purchase price. It is often used to determine whether a real estate investment is a good deal. [1]

For example, if an investment property is purchased for $100,000, it must generate at least $2,000 in monthly gross rent just to satisfy this rule.

This rule isn’t set in stone because it is unrealistic and not all-encompassing in every situation. It’s not always practical and may even be impossible to achieve in specific markets.

In most markets, a rate of 0.8% to 1.3% is more realistic. This may help you find more stable residents. Consider factors like property size, number of bedrooms and bathrooms, and included amenities. [1]

Suppose you follow the 2% rule; in that case, you may find that the investment property can generate enough money to cover its expenses while providing a cushion for maintenance and vacancies. [2]

The challenge is finding properties that conform to this rule in practice. BAM Capital can help you find investment opportunities in multifamily investment properties.

WHAT IS THE 50% RULE IN REAL ESTATE INVESTING?

In real estate investing, the 50% rule provides a rough estimate of a property’s expenses, which can help investors make more informed decisions. This percentage rule states that 50% of a property’s gross income should be allocated to its operating expenses, and investors should anticipate that these expenses will include insurance, property taxes, vacancy losses, repairs, owner-paid utilities, and maintenance costs. [3][4]

Therefore, if the investment property generates a monthly rent of $2,000, $1,000 will be allocated to the various property expenses listed above. Notably, this excludes any mortgage payments. When considering investing in rental properties, factor this into your monthly cash flow analysis.

The 50% rule is a valuable guideline for determining whether an investment is worthwhile. Consider it a key investment criterion that determines whether to investigate an opportunity further.

Like the 2% rule, this is just a guideline because a property’s expenses likely won’t be precisely 50% of income every month. While it can be a good rule of thumb, it doesn’t always apply in real-world situations.

WHAT IS THE 4% RULE IN REAL ESTATE INVESTING?

The following percentage rule isn’t about real estate, but a connection is worth mentioning here.

The 4% rule is a theory introduced by financial advisor Bill Bengen in the ‘90s. It suggests that an individual can retire and safely withdraw 4% of their retirement savings each year (adjusted for inflation after the first year)—and the money should last 30 years. [5][6]

Bengen proposed this idea after examining historical returns on marketable securities and determining that a 4% withdrawal rate was a safe rate for retirees.

Unfortunately, this may not be relevant today, and many advisors suggest basing it on current economic conditions and other variables. The theory raises several questions: What if someone lives for over 30 years after retiring? After all, most Americans who reach age 60 can expect to live into their 80s. The 4% rule also does not guarantee 30 years of income. [7] Real estate investment ties into this because it can potentially provide investors with a more substantial retirement fund to draw from later on.

WHAT IS THE 1% RULE IN REAL ESTATE INVESTING?

The 1% rule in real estate is the same as the 2% rule, except you are screening for potential rental properties that produce a monthly rent of at least 1% of the purchase price. Investors use this rule to analyze whether or not an investment property is worth putting money into. [8]

An example would be a rental property with a total purchase price of $200,000 and a monthly rent of $2,000. According to the 1% rule, this would be an investment worth looking into based on the rental income. [8]

This rule applies to more properties than the 2% rule because it is a much more realistic figure. While it shouldn’t be the sole factor in judging potential investments, it highlights the importance of having a disciplined mindset when buying real estate.

This rule is not necessarily a strict one you must follow but rather a guideline for improving your investing style. As a real estate investor, having a disciplined approach to investments is crucial to avoid financial losses. Investors should consider verifying that properties meet specific income criteria to help them avoid common investing pitfalls. [8]

Use the 1% rule as a prescreening tool to train yourself to become a wise and disciplined investor.

WHAT IS THE 70% RULE IN REAL ESTATE INVESTING?

The 70% rule applies to real estate investors who buy, renovate, and resell properties (also known as fix-and-flip investors). According to this rule, an investor should aim to pay no more than 70% of a property’s ARV or after-repair value. This includes the price paid for the investment property itself and the estimated repair costs associated with it. [9][10]

This rule relies on a simple calculation:

After-repair value (ARV) ✕ .70 − Estimated repair costs = Maximum buying price [10]

This maximum buying price should give you an idea of how much to spend on a home you plan to renovate and resell.

Because this rule requires a bit of estimation, you need to use a realistic estimate of the property’s value after repairs are completed. You should also estimate the cost of the repairs.

It can be simple to use this rule: just multiply the property’s ARV by 0.7. This rule will help you determine your maximum all-in cost. For example, if a property’s estimated ARV is $200,000, and you estimate repair costs to be $30,000, you should consider spending no more than $110,000. [9][10]

WHY PARTNER WITH BAM CAPITAL FOR MULTIFAMILY PRIVATE PLACEMENT (SYNDICATION) DEALS?

When picking a multifamily project to invest in, there are a few factors you need to consider. Regardless of your strategy for finding these deals, you will have numerous options. It’s all about picking the right one for you.

BAM Capital partners with accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying assets targeted as having strong profitability potential and staying disciplined in its investment thesis. BAM Capital’s investment strategy aims to create forced appreciation while seeking to mitigate investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.

For additional multifamily real estate insights, visit Pathways to Passive Wealth, BAM Capital’s new platform designed to make real estate investing more accessible, transparent, and achievable for aspiring and experienced investors.

Remember that no investment is risk-free. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.

Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect BAM Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. BAM Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.

© 2025 BAM Capital. All rights reserved.

SOURCES:

[1]: Houwzer. (2021). “Real Estate Investing for Beginners: What’s the 2% Rule?” https://article.houwzer.com/a/real-estate-investing-for-beginners-whats-the-2-rule

[2]: The Motley Fool. (2024). “How to Start Investing in Real Estate: The Basics.” https://www.fool.com/investing/stock-market/market-sectors/real-estate-investing/basics/

[3]: The Motley Fool. (2024). “How to Start Investing in Real Estate: The Basics.” https://www.fool.com/investing/stock-market/market-sectors/real-estate-investing/basics/

[4]: SmartAsset. (2024). “What Is the 50% Rule in Real Estate?” https://smartasset.com/investing/50-rule-real-estate 

[5]: Listen Money Matters. (n.d.). “The 4% Rule Vs Real Estate.” https://www.listenmoneymatters.com/the-4-rule-vs-real-estate/

[6]: Financial Samurai. (2025). “The 4% Rule: Clearing Up Misconceptions With Its Creator Bill Bengen.” https://www.financialsamurai.com/bill-bengen-retire-earlier/

[7]: BiggerPockets. (2018). “Does the 4% Retirement Spending Rule Still Hold Up–And Where Do Rentals Fit in?” https://www.biggerpockets.com/blog/4-percent-retirement-rule 

[8]: Coach Carson. “The One Percent Rule – Quick Math For Positive Cash Flow Rental Properties.” https://www.coachcarson.com/one-percent-rule/

[9]: The Motley Fool. (2024). “How to Start Investing in Real Estate: The Basics.” https://www.fool.com/investing/stock-market/market-sectors/real-estate-investing/basics/

[10]: Rocket Mortgage. (2024). “What Is The 70% Rule In House Flipping And Does It Show How Much To Pay For A Distressed Property?” https://www.rocketmortgage.com/learn/what-is-70-rule-in-house-flipping 

[11]: BAM Capital. (n.d.). “Current Portfolio.” https://capital.thebamcompanies.com/