Sunday, February 28, 2010

How to Evaluate Properties in 60 Seconds or Less

The 1% Rule

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 $300,000 and it gets $3,000 per month in rent, This simple calculation tells you that it is a property you'd like to learn more about. The numbers are looking really good.

If you have a property that costs $300,000 and the rent is $2,100 per month, it's hitting .7%. You might want to look into this property, but you'd 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.

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