Formula for buying rental property????

[Rick Doshier]

Question,

I was speaking to a landlord today and he was saying that he buys houses that will pay for themselves in 3 years. Example

House is selling for $21,900.00

Rent is $500 Mo. @ 12 mo. = $6,000.00 x 3 yrs. = $18,000.00.

Therefore $18,000.00 is the most you can give for this house.

Is this the same as the 2% rule just another way of figuring it.

Do you guys us this type of formula to figure what you will pay for a house?

Thanks

RD