I don't think he is referencing a 1% or 2% return. He is referencing a guideline that monthly rents = 1-2% of purchase price.
I understand what he is referring to, thanks. :)
What I am saying is when you don't meet the 1% rule at a minimum, even if you barely cash flow, as he suggests is okay, your returns will be only a few percent at best ("Don't meet 1%? Expect that to be your return" is a catchy, if a bit hyperbolic, way to say it ;) ). At that point I wouldn't bother investing in real estate, as you can get those returns with much less risk and hassle elsewhere.
Sorry I wasn't clear on that. If you hit the 2% rule, I'd expect around a 12% return. If you're hitting closer to a 0.5-0.8% rent to price ratio, I'd expect closer to a 2-4% return.
I also disagree with Arabel - there's nothing wrong with shopping on MLS for many beginning investors. Yes, it will be harder to find deals and you will be competing against many more people but most people don't have the knowledge or time to start up a marketing campaign to seek out off market deals.
Sure, stuff on the MLS can be fine, but it's not a "deal" - it's buying at market value. I have bought off the MLS, and still do. But I don't tell myself I'm getting a steal.
Further, if you want to beat the MLS prices (i.e. the ones on the MLS in your location don't fit the 1% rule, such as in Seattle), you'll have to go off MLS. I'd rather go off MLS and find a deal that hits at least the 1% rule than buy one off the MLS that doesn't.
If you are a beginner in an area where your MLS doesn't hit 1%, I'd tell you to go off MLS, or not invest. I wouldn't just take mediocre returns because that's what the lazy option is giving you. YMMV.
Seek out stuff on MLS that isn't as widely sought out. For example, older condo's (my last deal this summer was a condo that rents for $845/mo and cost $47k), twin homes (many people don't search them as they are a separate flag on MLS) or markets that are 30-45 miles outside the major metro.
I'd rather have a good property that fits my model than compromise on that and buy some oddball non-conforming property just to buy off the MLS. Everyone needs to set their own criteria though, I'm glad your strategy is working for you (and I know it is, I've seen and appreciated your posts on E-R.org, so don't take this as critical against you, just caution for the new people, as I've seen way too many buy a random property from the MLS they think is a deal and get in over their head and have no margins to bail them out). :)