Denominator Used for 2% Rule

[Cole Swartz]

I understand the effectiveness and validity of the 2% Rule varies from market to market and that there have been an abundance of discussions regarding the topic, but I am curious as to the different variables people use in the equation itself. Obviously, the numerator is the Gross Scheduled Income, but what do you folks use in the denominator (purchase price, purchase price + rehab costs, ARV, etc)?

As I've browsed the forums it seems different people have slightly different interpretations of the equation in this matter.