Rentability Quotient


Calculating the "Rent to Value" quotient

What is this?

  • A quick and easy way to calculate/evaluate potential investment properties with relation to their price and projected rent.
  • A scoring system that helps determine how well an investment property will potentially cash-flow out.
  • The higher the score is, the BETTER.


"Projected Rent" divided by "value" = "RV Quotient"


IDEAL


$1,400 divided by $200,000 = .007

ACCEPTABLE


$1,000 divided by $200,000 = .005

NOT A GOOD PROSPECT


$600 divided by $200,000 = .003

If the "RV QUOTIENT" is higher, one can expect to purchase the subject property with a smaller down payment and the property’s monthly rents have a better chance of covering the property’s monthly expenses.




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