Rule of 15?

Ever hear about the “Rule of 15”? Neither have I, until I read this piece on CNBC. Google it, and you find only this article (at least in terms of a Rule of 15 that applies to real estate), so this is one of those “Your Mileage May Vary” (YMMV) things you find on the Internet. Take it with a grain of salt.

If the rule was stated, it seems to say that the purchase price of a house should be approximately 15 times the yearly rent for the equivalent house. If the house is going for an appreciably higher multiple, then it may not be a great buy. Appreciably lower? Then it may be a deal.

You can also apply this to your current home to see if–and about how much–it may decrease in value during the current burst of the real estate bubble.

Interesting, at least.

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