I would like to share a quick trick I learnt on how to speed up the process of evaluating properties for their cash flow potential. This technique is a simple calculation that tells you to continue looking at a property or to move on. While it is still important to do your due diligence, here is a way to quickly investigate a property in 1 minute or less.
All you need are two numbers: the price of the property and the rental income you will get each month. If the monthly income is 1% of the purchase price then you are pretty much guaranteed a property that will cashflow.
For example, if you have a property that costs $200,000 and it gets $2,000 per month in rent, the simple calculation tells her that it is a property you would like to learn more about. The numbers are looking really good.
If you have a property that costs $200,000 and the rent is $1,400 per month, it's hitting .7%. you would probably still look into this property, but you would do it knowing that the money will be tight. Anything lower than than .7% is going to be really hard to make cashflow without either a big downpayment, lower purchase price or higher rent.