The % Rule in Pittsburgh

[Savannah Lewison]

To those who purchase in Pittsburgh: when looking through potential properties, what have you found to be the most accurate % to use on running quick numbers to see if there may be some cash flow before deep diving into analyzing? 1.5 % 2% 3% or more? 

I am specifically referring to the formula: 

monthly rental income/purchase price = x 

If x is greater than said percent then you’ll look further into anylzing. If less than, you know it probably won’t cash flow. 

[Adam Gollatz]

The short answer to your question is that right around 1% is when a deal starts to cashflow with the standard expense assumptions (15%capex/repairs, 10%management, 5% vacancy, etc) when you are looking at a 200k purchase and 5% interest rate and 20% down. It shifts towards 2% with lower value homes and down toward .7% in higher market homes.

I have an google spreadsheet I set up, I can put in rents, purchase price, and taxes and it will spit out a cap rate and cash flow estimate. Theres an app to get sheets on your phone so its just as simple as punching in the rents/purchase to calculate the '2% rule'.