How to run the numbers on a property?

[Michael Guydish]

I plan to do my first deal in the next year or so and I want to start running numbers on properties now to practice and see whats a good deal and whats not a good deal. I plan to do long term rentals with multi-family and single-family properties. My question is how exactly do I do this? Whats the secret formula to see if a property is worth investing in? Any information will help. Thank you!

[Patrick Daniel]

I hate the "It Depends" answer, but it this question will certainly be answered this way unless you give parameters for what you are trying to get out of your investment.

Are you looking for high cash flow, appreciation, or a little of both? 

How much do you want to leverage, if at all?

Are your homes going to be newer where your Capital expenditures are lower?

Will you self-manage? If so, will you switch to professional management later?

are you paying utilities?

What are vacancy numbers in your target neighborhood?

These are all questions I would look at beyond the standard price vs rent question.

I would start with the end in mind first and find out what exactly your goal is for a property.

e.g. "I am looking for a 10% return on my money and at least $150 cash flow per door". 

Once you have your desired destination, you can work backward to where you need to be.

Look at the rental calculator here on the site and plug in some numbers to see how they change your outcomes. 

For example