How Reliable are the 50% and 1% Rules?

[Derek Luttrell]

Hi Everyone, 

Listening to podcasts and reading the forums, I hear and see these rules of thumb getting mentioned all the time. My question is, what else is there to look out for AFTER both rules are met? Say there's a property with a newer roof, water heater, etc listed for $63,000 that has a $420 monthly payment (20% down) and rents for $1200, what are things that a newbie might miss that would make this a bad deal? 

I know they are just that--rules of thumb--but are there people out there who live and die by this strategy, or contrarily, people who think these rules are rubbish? 

50% rule: 1200 - 600 - 420 = $180

1200/63,000 - 1.9% 

Appreciate the insight, 

- Derek