Real Estate Insight

When your realtor is bringing to you properties of interest that match your property type, you must use the 10% rule when examining the property.

What is the 10% Rule?

• The 10% Rule is an incredibly important step that you cannot skip.

• It is a formula that you have to use in order to filter properties.

• If the property passes the 10% rule test, you put this property on your list of ‘properties of interest’.

• If the property fails the 10% rule test, then you want nothing to do with the property. Move onto the next property, and start to analyze that one.

• You must perform the 10% rule test on every single rental property that you review.

The 10% Rule Formula

• You get from your realtor the monthly current rents of the rental property

• You multiply this value by 12

• You take this new value and divide it by the total purchase price of the rental property

• When you calculate this, if you get a number of 10% or greater, you should put this property on your short list.

• If you get a number below 10%, please forget about this property and move on.