This is the first of three formulas for buying a rental property.  In this version the rental is purchased with cash.

Here are the assumptions:

• You have $166,000 sitting in a non-productive instrument, perhaps a savings account, mutual fund, low-yield bond, or your funds are in a CD that is getting ready to mature, or the cash is buried in a coffeee can in the back yard.
• The tax benefits or liabilities are not computed (see your CPA or tax lawyer).
• The purchase price and  rent are hypothetical and will vary by location.
• The property will need some fixing prior to renting.
• Property taxes are based on the California ad valorum 1% rate plus a bit of miscellaneous supplements.
• Closing costs are customary for northern California for a cash purchase and include inspections.

Summary:  If you can buy the property for $155,000, fix it up for $13,000, and get $1430 rent, you will net $1000.00 per month.  (Remember, income taxes on the net are not computed in this formula).