The gross rent multiplier shows a 9% return on the gross scheduled income.

Multiply by .7 or .75 and deduct conservative rehab/holding costs.

The analysis below is a conventional loan with 20% down.Financial Analysis Cash on Cash Return3.65 %Internal Rate of Return (IRR)9.65 %Return on Equity (ROE)4.05 %Capitalization Rate5.89 %Gross Rent Multiplier (GRM)9.06Debt-coverage Ratio (DCR)1.24Operating Expense Ratio (OER)43.19 %Also, the seller is offering owner financing with interest only loan for 3 years so she can have time to locate another property in Florida (this property is in West Virginia) for a 1031 exchange.  

Purchase Price $ 166,083.31  Year Built 1910 Realtor or Finders Fee $ -     Lot Sq Footage 0 Total $ 166,083.31     Sq Footage 1684       Yearly Tax $ 10,000.00 Amount to be Borrowed $ 228,440.32     Bedrooms 3 Personal Cash Invested $ 35,216.66     Bathrooms 2           Pre-Inspections       Lip Stick $ 18.00 GC Quotes $ 700.00     Lip Stick Advanced $ 24.00 Lining $ 700.00     Standard $ 28.00 Inspection $ 600.00     Vandalized $ 32.00 Total $ 2,000.00     Big Gut Out $ 36.00           Cost of Money     Remodel Type Standard Points (assuming 5pts) $ 10,000.00         Broker Fee $ 2,000.00         6 months Interest $ 17,133.02         Lender’s Lawyer $ 1,300.00         Total $ 30,433.02                 Closing at Purchase Potentially covered in points payment     PurchaseTax $ 3,321.67 I assume 2%       Title Work $ 1,000.00         Total $ 4,321.67                 Construction Costs         GC $ 47,152.00 I multiply sq footage of house by preset number   Materials $ 10,000.00 Total Guess       Misc (Permits, etc) $ 5,000.00  Guess       Appliances $ 6,000.00  Guess       Safety Net $ 15,000.00 is this enough or too much?    

Domenick, From the two sites you recommend me do they show me the Gross Rent Multiplier of a certain city, also are these sites more accurate with information than mashvisor.com?

Thanks for your thoughts @Paul Jamgotch .The way I have to look at it is that I bring 3 pieces to the table:The ability to put an investment partnership together and make them moneyThe ability to handle the real estate transaction on the buy and sell, saving 6% of net at a minimumA contractor with skin in the game, who also owns a cabinet shop and handles many of the sub jobs personally.These investors see what a tremendous opportunity they have to multiply their return compared to their current vehicle.

Then take that # and multiply it by about .65 to give you an approx on the most an investor should roughly spend if flipping or wholesaling it.  

I look at the GRM (gross rent multiplier = purchase price / current annual rent).  

The main reason I ask is I feel a lot of the property I am looking at is overpriced but the majority of the property I'm looking at is on the MLS and as of right now I'm working with an agent looking (trying to multiply my time I guess).

Well, the rub is that the builderdeveloper is probably trying to sell the building to some fund or investor and if you multiply that extra $200/month in rent by a 5% CAP rate they (the builder/developer) will net roughly an extra $50K in additional sales price when they sell.