I've read numerous times, and I don't argue with the logic behind it, that you should be getting 1% of the value of a rental home in monthly rent ($100,000 home should be getting you $1,000 a month). If it's less than that, you shouldn't be owning it. I've read articles on BiggerPockets where they'll walk away if they aren't getting 1.5% or 2% a month.
I've been watching the market for about two years locally. I have yet to find a house that fits a 1.5% rate that isn't subject to MASSIVE repair issues (thus likely destroying the 1.5% ratio) or that isn't in the ghetto (sorry, not interested in doing it).
When I run the math on homes in my area that are being rented out, most don't satisfy the 1% rule. I ran 3 homes in a neighboring city, and 4 homes in my city that are currently listed for rent (or rented recently), comparing rental rates to zillow values. I get:
1.3%
0.53%
0.88%
1.19%
0.66%
0.95%
0.81%
For an average of 0.918% (if you exclude the high and the low, you're at 0.917%). The two that were above 1% were actually in the slums of the area, not exactly what I want to deal with as a landlord.
Based on my math, assuming 50% of your rent goes to expenses, and 5% interest rate, 100% financed loan (yes, I wouldn't be 100% financing, but to calculate otherwise would be "forcing cash flow"), my P&I would run ~0.55% of the value of the home per month. Which means I'd need to rent for 1.05% of the value of the home just to break even.
Where are these homes located at?
PS - I own a rental home with a friend, more by accident than design, and the rent is set at 0.62% of its value. Zillow estimates my home would generate 0.78% of its value per month in rent. So I'm not working on entirely hypothetical values.