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Podcast – Quick and Easy Rental Property Math

December 24, 2021

The Lousy Investor Episode 11:  Quick and Easy Rental Property Math

To watch the podcast, please click here.

No one gets into Real Estate so that they can spend all day pouring over Math Calculations. We want to do deals and make money, right?!?! So today I am going to give you some simple tools to analyze a rental property in seconds.

First is the 1% rule. This simply means that the monthly rent on a property is equivalent to 1% of the purchase price. For Example, if you purchase a property for $140k that needs $3k in repairs, the all-in cost is $170k. With the 1% rule, this property would need to rent for $1,700 a month!

Next is the 2% rule. This rule is VERY similar to the 1% rule. With a 2% concept, the monthly rent is equal to 2% of the all-in cost. If we use the above example of $170k all-in cost, with a 2% rule, the property would rent for $3,400 per month. Now that may not be realistic in this part of the cycle, but it is still good to understand the math, right?

Lastly is the 50% rule. Here we are stating that roughly 50% of the Gross income will go towards paying all the expenses for the property, not including the mortgage. So, if a property rents for $1,600 a month, the net rent would be $800.

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Date:
December 24, 2021