3 Rule Money: Understand the Rule of Three in Real Estate Investing

When people talk about 3 rule money, a simple rule used to estimate if a commercial property generates enough income to be profitable. It's also known as the rule of three, and it’s one of the first filters serious investors use before diving into numbers. The idea is straightforward: the annual gross rent should be at least three times the purchase price. So if a building costs $300,000, it should bring in at least $90,000 a year in rent. Sounds simple, right? But here’s the catch—it rarely works in today’s market.

This rule was born in a time when interest rates were low, rents were high, and commercial properties were easier to find at bargain prices. Today, with inflation, rising interest rates, and tighter lending rules, the 3 rule money often gives false signals. A property might meet the 3x rent rule but still lose money after taxes, maintenance, vacancies, and property management fees. That’s why smart investors don’t stop at the rule of three. They pair it with other metrics like cap rate, the ratio of net operating income to property value, and cash flow, the actual money left after all expenses. These give you the real picture—not just a quick estimate.

You’ll find plenty of posts below that dig into how the rule of three fits (or doesn’t fit) into real-world investing. Some show you how to adjust it for different markets. Others prove why you should ignore it entirely and focus on long-term income trends instead. There are also deep dives into what actually drives commercial property value—things like tenant quality, lease length, and location perks. Whether you’re looking at a small office building in Texas or a retail space in Virginia, the goal is the same: make sure the numbers work after all the hidden costs are counted. This isn’t about guessing. It’s about knowing exactly what you’re buying before you sign anything.