Has anyone heard of a 26% rule on making an offer?

[Ryan Pemberton]

Has anyone every heard of analyzing a rental property by taking 26% (or 74% of the monthly rent) off the monthly rent and multiplying by 60 months to come up with an offer price?

Ex: $500/mo rent x 74%

$370 x 60 = $22,200 offer price.

I think it might be a good rule of thumb but it seems a little black and white for analyzing every deal. Specifically, I'm looking at some properties that the owner is renting way below market price...so using these analytics makes the offer prices crazy low. Like...less than half of retail..

Any insight would be awesome!

Thanks! 

[Florian N.]

@Ryan Pemberton So at an asking price of 100K for a property that rents at 1000/month(exactly standing at 1% rule) you will end up offering 44.400. That's a nice chunk of discount there at 66% off asking price. 

Who will accept this price and why on earth would they do that?