What Numbers do you Run to determine if a real estate investment is good

It starts with having good numbers in the first place.

The majority of people that get into real estate in my circles do fine, but make alot less than their original pie in the skies assumptions would have suggested.

all mine are at 1.5% up to 2% RTV.

now people are buying @ .6% .7%........ huge mistakes.

1% is the bare minimum. correct.

OP needs to make sure he has good positive cash flow. cash on cash return is the next number to be concerned with. PCF is most important tho.

CoC return is worthless if you are over leveraged with a small PCF. a bigger DP is not always bad to get the PCF you need.

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2% rule The monthly rent you should be able to get is 2% of what you pay for the property. This was so easy after the 2008 crash and now it is almost impossible. Now the standard is 1%

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Using New Orleans As an example


In New Orleans, monthly rents are around $2/sq foot. For a 1000 sq ft place, the rent should be $2,000/month. $2,000/.02 = $100,000.

100,000/1000 feet is $100/sq foot. Sales in Nola are much higher than that so it’d be real tough to get that 2% rule in Nola.

My bad. I pasted incorrectly.

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This is a terrible rule - did you make it up?

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Granted the 2% is very tough rule to work with and even 1% can be hard but do you have a better one that we can use?

Everything you mentioned really? Are you looking for specific benchmarks? You need to examine your reasonably estimated numbers for your cash investment and compare it to what you can get with safer investments.

I think unless you are super wealthy and want to accrue property with plenty of cash reserves, cash flow is important. I think its unwise to rely on estimated appreciation as a metric but rather treat it as cherry on top kinda thing.


I really dont pay attention to specific benchmarks but there are some you can use as a barometer I guess. Bigger Pockets used to be big on the 10% rule

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100,000/1000 feet is $100/sq foot. Sales in Nola are much higher than that so it’d be real tough to get that 2% rule in Nola.

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You really shouldn’t be looking to buy rental properties retail. Doing so can be done but as a last resort or when it’s a really heavy buyers market like
A crash. Wholesale, auctions, etc offer much better chances of a profitable ROI

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Sounds great but how do you buy wholesale?

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If those that are good at it told you the answer they would be creating competitors.

The junk mail, billboards, etc. you see are all people buying wholesale. Many of them are just looking to flip quick, so getting in touch with them to buy off them is a good start.

The other answer is to be patient. You should always be looking but not always be buying.

"Good properties don’t abide by rules of thumb
Many perfectly fine properties don’t meet the 1% or 2% rules. You might be looking at the 0.5% rule, or the 0.25% rule—or even less. Really, it’s about your budget and your goals for your portfolio.

Every investment requires trade-offs between returns, cash flow, and risk. You could find a property that meets the 2% rule but is such a high-risk investment due to location, property quality, tenant quality, or a declining market that the projected cash flow will never pan out.

Maybe there’s a quality property in an excellent location—but it would only make, say, a 0.8% rule (if one existed). Despite the lesser projected cash flow, it might be a better investment!

There are a million other factors to consider. Does it cash flow? How’s the location? What’s the condition? Is the market growing or declining? Is the tenant pool high quality? Those are the questions that matter—not any “rule.”"