Rule of 100, 1% Rule, or whatever it is called
In looking at rental properties with a realtor, he mentioned the rule of thumb of looking for something with gross rents of at least 1% of the purchase price. What are your thoughts on this? Do you use this rule? If so, how do you use it?
This seems like an overly simple analysis. Don't you need the expenses, etc. to figure out if the deal is good. I can easily see situations where the rent meets the 1% criteria, but expenses cause negative cash flow or the cost of borrowing ruins the profitabiliy. Maybe the rule is used as screening criteria to help determine if you want to do any further investigation?