How to Determine the Best Price to Pay for a Rental Property

Most investors who want to be landlords check out buy investment properties by studying the net return of investment. There are faster and much easier methods to reach the same result and automatically get a substantial return through the investment.
Let's first say there are 2 reasons for income from rentals that investors ought to be investigating - the multi-family conventional rentals and single homes (SFHs). The SFHs historically are not made to be rentals nevertheless the condition in the market and also the economic conditions using parts in the country dictate that SFHs are viable rental properties.
The benefit for SFHs over multi-family properties will be the expected appreciation in value in years to come. So, besides the rental income to cover a home financing, the property owner might be able to be given a positive cashflow through the rental income and get some tax benefits.
Multi-family properties will usually trade based on net rental income to the property owner. The net income is simply the gross rental income for that year less almost any expenses to derive the volume of cash remaining to the master. These expenses include, but are not tied to: mortgage payments, property taxes, vacancy (non-income), maintenance, property management, and utilities otherwise paid by tenants.
Historically, a guideline for pricing rental income properties was that one percent a month from the mortgage or purchase price yielded the dog owner approximately 10% return. It was then as much as the property owner to carefully control his costs to obtain a reasonable return on his invested money. This rule-of-thumb was later raised as to what became known as the "2% Rule". But rising property taxes costs have inflated the ratio to three percent (3%).
To exemplify these basic guidelines, let's consider what these percentages mean:
1. The 1% Rule implies that over a $100,000 purchase price, the master should receive at the very least $1,000 30 days rental income.
2. The 2% Rule signifies that on a $100,000 cost, the dog owner should receive at least $2,000 per month rental income.
3. The 3% Rule ensures that on the $100,000 price, the dog owner should receive at the very least $3,000 monthly rental income.
While the reader might claim that $3,000 30 days rental income over a $100,000 property is impossible, it's not and now we are buying tri-plexes and quad-plexes at these levels over a regular basis. A SFH that will set you back $100,000 may possibly generate $1,250 a month rent hence the investor has to come to a decision about his final exit strategy - whether or not to obtain a income and accumulate income properties or go for the appreciation once the market returns to former heights.
Usually,  property management Maribyrnong  that does the very best for investors is to do at least one SFH in every single three rental properties the investor accumulates. In addition, it is rather helpful to set up a high income by wholesaling properties the investor doesn't want to hold. This gives the investor "chunks of cash" short-term (wholesaling), steady income monthly (rentals) and builds a pipeline of SFHs to be sold inside years in the future.