Any potential rental income won't be counted toward qualification.If you take out a HELOC on the current house, just do the math on how that effects your cash flow.Don't fall for the "cash flow = rent - mortgage payment" myth.

I can do fundamental math but it will not stop me from using a calculator.

Don't be worried - if you've done your homework, you'll be fine :) Hopefully anyways!

We did the math and worked it out so the cash flow would cover the 20% down after the 5 years.

Use your new RE negotiating skills to find a hell of a deal on CL.As far as the math, 1.25%/mth of gross rent is 16%/yr.

If I rent, I pay (to make the math easy) $625/month but also get the same from my rental.

I'm still early in my "homework" but have been reading actively and trying to soak up knowledge.My wife and I are primarily interested in vacation units and long term rentals.

Due some more homework on your comps.

In other words, if one would pay all cash for this unit, he would get 10% on his money, annually, which is not bad at all.Of course, there are many other variables to take into account.Stability of the area and the tenant, condition of the property, and the general neighborhood's economics and employment situation, to name a few.You can even lower the net to 70% instead of 75%, and still end up with a very good cap rate of just under 10%.For Southern CA property, that is a very good return.Do the math, even with 11% down, and 4.5% bank loan you will have a good cash flow (I did not do the math for this part, will leave it to you from here).Buy it.Amir

I wrote a blog on here on calculating numbers if you want to check it out- http://www.biggerpockets.com/renewsblog/2013/01/19/real-estate-math/The note with that article is it doesn't take into account anything about fixing up a property.