Rich Dad Residential Mutli-Unit Formula

[Yannick W.]

What do you all think of the formula provided by Rich Dad for analyzing and valuing Residential Multi-Unit investment properties?

Yearly Gross Rent x 7 (+ / - 10%) = Max Allowable Offer

The premise is that these properties are valued on current cash flow ability, as opposed to comps or appraisals. The (+/-10%) is an adjustment for the condition of the property. Also, the claim is that the multiplication by seven is 'the gross rents multiplier', being 'just the right value' to provided a crate valuations. To me, this simply appear to be providing value based on 7 years' gross rent.

You are also told to subtract PITI (at 1% of value) to determine worst case scenario cash flow, per month.

I like the idea, but the the numbers seem a bit low, particularly compared to property value in my market (Cayman Islands). Does anybody have any experience using this formula?

Thanks