What Is the 7 Percent Rule in Real Estate? | Bre Enbom, Kitsap Peninsula Realtor

When analyzing rental properties, investors often refer to something called the 7 Percent Rule—a simple formula that helps determine whether a property could generate a strong return on investment (ROI). But what does it mean, and how can Kitsap Peninsula investors use it to make smart buying decisions?

Understanding the 7 Percent Rule

The 7 Percent Rule suggests that an investment property should ideally generate at least 7% of its purchase price in annual rent. This quick calculation helps identify properties that could provide positive cash flow after expenses.

Here’s how it works:
If you’re looking at a home priced at $400,000, multiply that by 7%.
→ 0.07 × $400,000 = $28,000 per year, or about $2,333 per month in rent.

If local rental rates can meet or exceed that amount, the property might be worth further analysis. If not, the numbers may not support your long-term investment goals.

Applying It to Kitsap County Real Estate

Across Kitsap County—from Bremerton and Silverdale to Port Orchard, Poulsbo, and Bainbridge Island—rental demand remains strong, but home prices vary widely. The 7 Percent Rule helps investors quickly compare properties across neighborhoods and determine whether the potential income justifies the cost.

However, it’s important to remember that Kitsap’s rental market is influenced by factors such as proximity to naval bases, commuter access to Seattle via ferry, and local job growth. A lower-yield property in a high-appreciation area could still be a smart long-term investment.

The Rule Is a Starting Point—Not the Whole Story

The 7 Percent Rule doesn’t account for maintenance, property management fees, taxes, or vacancies. It’s best used as an initial screening tool—a fast way to narrow down potential investments before running a detailed ROI or cash flow analysis.

Partner with a Local Expert

Understanding how national investment rules apply to Kitsap County’s unique market requires local insight. As a Kitsap Peninsula Realtor with Infinity Real Estate, I help clients analyze both the numbers and the neighborhood trends to find the best-performing properties for their goals.

Whether you’re just beginning to invest or expanding your portfolio, the 7 Percent Rule is a great place to start—but local expertise turns it into real opportunity.

📍 Serving Kitsap County: Gig Harbor | Bremerton | Port Orchard | Poulsbo | Silverdale | Bainbridge Island
💼 Bre Enbom, Realtor – Infinity Real Estate
Your Kitsap Peninsula Real Estate Expert for Smart Home and Investment Decisions