This is the second of three formulas for buying a rental property.  In this version the rental is purchased with a down payment of 20% and a fixed rate loan of 80%.

Here are the assumptions:

• You have $50,000 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 coffee 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 loan-financed  purchase and include inspections.

Here are the Assumptions

Summary: If you can buy the property for $50,000, fix it up for $13,800, and get $1430 rent, you will net $427.00 per month.  (Remember, income taxes on the net are not computed in this formula, nor are the mortgage tax deduction and business expense deductions calculated).