I am no real estate investment expert. I have used tried and tested ways to evaluate an investment before
going down the road of deeper evaluation and due diligence. In order to evaluate a property’s income potential, I always start with the One Percent Rule: Does the monthly rent equal one percent of the purchase price or more? If the answer is yes, I continue with my diligence. If not, I move on to the next investment property.
Example:
Purchase Price: $100,000
$100,000 x 1 % (0.01) =
$1,000
Is the monthly rent greater than, or less than, $1,000?
In other words: for every $100,000 in price, I look for $1,000 in rental income. If a house costs $250,000, it needs to rent for $2,500 per month or more...Read More
going down the road of deeper evaluation and due diligence. In order to evaluate a property’s income potential, I always start with the One Percent Rule: Does the monthly rent equal one percent of the purchase price or more? If the answer is yes, I continue with my diligence. If not, I move on to the next investment property.
Example:
Purchase Price: $100,000
$100,000 x 1 % (0.01) =
$1,000
Is the monthly rent greater than, or less than, $1,000?
In other words: for every $100,000 in price, I look for $1,000 in rental income. If a house costs $250,000, it needs to rent for $2,500 per month or more...Read More
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