Tips to help my develop a better strategy for property analysis

[Daniel Villegas]

I am a beginner starting to look at property’s I need to develop a more structured and accurate strategy for property analysis. I do not yet have the instincts to tell me whether a Property is worth it or how much potential cash flow can create? Any formulas or proven models to help are appreciated!

[Lynnette E.]

When I want a quick analysis to see if a property is worth looking at I take the price, plus the cost of any major repairs or maintenance that is needed within the first year.  I do not include things like a new kitchen or bath or painting unless it is really needed, not just wanted.   

Then I estimate the monthly rent.  

If the monthly rent is more than 1% of the cost of the property and needed repairs/maintenance then its worth a deeper look.

This is called the one percent rule.  It does not work everywhere, but does where I invest.

Example:  House costs $180k, needs new HVAC for $10k and a new roof for $20k.  Total cost of property and needed repairs/maintenance is $200k.

1% of $200k is $2k.

Rent is $2400 a month

Pass since the rent is $2000 or more.