How to Estimate Rent Cost

[Jordan Liles]

I am just starting out and doing research on to hopefully become more familiar with the ins and outs of rental property in my area in eastern NC. One question I did have that I find very relevant and a big determinant in choosing what property to purchase and that would be what to charge for rent and how to determine whether or not a particular property is worth purchasing based on its income. 

I am primarily wondering how to best determine whether a particular single/multi family home would be a good candidate for being self-sufficient each month (outside of unforeseen maintenance & repairs) based on what rent is collected. I am not sure if I need to be shooting for a ratio or percentage of the total price of the home that would be a typical rule of thumb or not. But for example, if I am looking to buy a duplex for $130,000 and say the percentage of the total price that I need to be aiming for is 10%, I would need to be able to collect a monthly income of $1,300 from that property to make that property a good investment. Ten percent may not be close to the correct percentage, but has anyone had success in finding a ratio/percentage that works for them and that they would typically go by before considering a property to purchase? 

[Anna Buffkin]

I am in South Carolina. I use the 1% real as a quick disqualifier on SFHs. If it doesn't meet the 1% rule it probably won't cash flow in my area. I use 2% on condos to account for HOA and relatively low rent.

Once a property meets the 1% rule, I check the property tax.  That is the biggest deal killer for me in SC.  If the property tax is not astronomical, I run a proforma using an excel spreadsheet I made to see if it looks like it will cash flow.   I already know my lender's basic terms to estimate the mortgage amount and use a vacancy rate of 1 month's rent and base my maintenance estimate between 5 and 10% depending on the type and age of the property.

Note: I have 8 rentals and am by no means an expert.