This was suggested by a real estate investor friend of mine. Using rental information, this is a quick way to evaluate whether a property is worth looking at any further. After checking out the idea while doing my own analysis of rental properties for myself and my clients, I found it to be pretty accurate.
Here's what you do: take the amount of monthly rent the property brings in and multiply that by 100. If the price is at or below that number, you might want to take the time to look further into whether the property will cashflow or otherwise meet your investing goals. Usually if the price is much higher than that the property won't make much sense and you don't need to spend the time or energy analyzing it.
Having said that, when interest rates are low, the multiplier should probably change to reflect the lowered cost of money. I haven't thought about it before, and I'm not in a position to run any numbers at the moment, but I would imagine you might safely raise the multiplier to 110 or so and be safe. After all, it is just intended to be a quick rule of thumb, after all.
Hopefully that will be of some value to those of you interested in investing in rental real estate.
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