Has anyone seen this calculation?

[Jesse Unrath]

I was talking to a real estate agent about rental properties, and i was explaining when im analyzing a deal (which is all i have done so far) how i calculate in percentages for vacancy’s, repairs, cap ex etc. They said they do a simple calculation of.

Monthly rental income x 12 / purchase price.

And they look for the number to be between 50 and 100%. With 75% being an average return and closer to 100% the better. This seems like a very general way to calculate things and not all that accurate? Anyone seen or done this before?