Anyone have rules of thumb they stick by when calculating how much to pay for rental properties (i.e. calculations, cash flow amounts they stick by no matter what?)
I wouldn’t even look at a property that I couldn’t cashflow AT LEAST $145 per month after EVERYTHING was paid…
My initial screening criteria was that I needed to be able to rent for 1% of the sales price. In low cost areas (low taxes., low insurance, etc.) this worked for me.
Keith
I won’t buy a rental property unless the monthly gross rents are at least 2% of the purchase price (plus rehab costs, if any).
I also won’t buy a rental property unless I can pay less than 70% of the market value.
Mike
gross rents close to 1% of purchase price; then I dig in and really look to see if there anything worth considering.
gross rents double the PI payment
Double the purchase price is a good rule of thumb… However, Taxes and Insurance has been eating me alive the past couple of years. Both are increasing, eating at my profit…almost to the point where I am breaking even now on properties that were cash flowing $200 per month two years ago. So… watch T&I as much as P&I!