The 1.25% rule states that your monthly rent should be approximately 1.25% of the purchase price.
Example: A $100,000 home should rent for $1,250 per month; a $200,000 home should rent for $2,500 per month.
2. The 50% Rule
The 50% rule is a great rule-of-thumb that helps you to predict how much your expenses are going to cost you each month. The 50% rule simply states that 50% of your income will be spent on expenses -- not including the mortgage payment. By the income in half, you are able to easily see how much you'll have left to pay the monthly mortgage (principal and interest). Any income left over is your cash flow.
Note: Expenses includes repairs, vacancies, utilities, taxes, insurance, management, turnover costs, and the occasional "big ticket" repairs.
3. The 70% Rule
The 70% rule is used by investors to quickly determine the maximum price one should pay for a property based on the after repair value (ARV). The 70% rule says that you should only pay 70% of what the after repair value is, less the repair costs.
Example: If you are shooting for a $200,000 value in a property and it needs $35,000 worth of work. Using the 70% rule, multiply $200,000 x 70% = $140,000 - - $35,000 in repairs. The most a person should pay for this property is $105,000