They will take a $1,000 rental, subtract their $600 for the mortgage, and claim they are cash flowing $400 a month. 

I also take average rents for similar houses in that neighborhood, look at DOM and subtract about $50 to arrive at my rent price.- 100/month for repairs and maintenance- Equivalent to one month's rent for vacancy/turnover etc- Insurance costs + 10%- HOA costs + 10%- Taxes + 10%- Management fees of about 9% of gross rent (fee will decrease with more properties)and after all expenses - (rent x 12 - expenses/ cash invested) my goal is about 6.5%.

Most owners will want you to screen and place tenants, collect the rent, subtract your fees and send them the balance every month.  

In other words, our labor, which is finite, is contributing in a meaningful way to the returns in a way that is not necessary in a passive investment like the stock market.We do all that because it's a good business, but a lot of real estate investors get into trouble because they don't know that they are getting into a business, and when you subtract the value of your labor, I contend that the real return on capital is going to be around 7%, just like in the stock market.

Next, subtract the balance of your mortgage.

Cash flow is what is left after all expenses are subtracted from rental income, it can be positive or negative.

Subtract that from the offer

If the terms were payment over X-yrs +/- down payment +/- interest you’d determine the monthly payment and then subtract that from market rent and that would be the payment she’d give you each month.

To figure out how much you saved you would calculated your taxes owed at $60k and then calculate your tax owed on $54k and subtract it from the first number. 

Info below.Purchase: 119kRehab: approx 67kSell: 263kNet profit: $58k (really good one)How I got it: wholesalerMore details belowPics belowFinal ReconciliationTime from start to finish (in months)4.13Time from start to finish (in % of year)34.40%Cash from Borrower (Line 303 on HUD) 18303.84Add back earnest money deposit if I sent one100Total cash to purchase 18403.84Less whatever commission I received- with the admin fee of $395 taken off of the total commission amount0Cash to purcahse less commission (final total amount of cash invested to purchase)18403.84AddRehab Costs66678.83Utility Costs @ 80/mo330.4Mist Costs @ $1K1000Total Cash Costs Not Including Interest86413.07Interest- subtract my Eagle unused interest payments from the interest reserve; add the interest payments I made for hard money4480Total Cash Costs Including Interest (subtract for Eagle, add for hard money)90893.07Cash to seller (Line 603 on HUD)149757.36Any commissions I received when selling0Cash to seller plus any commissions I received (my net cash at sale)149757.36Net Profit$58,864Return on cash65%Annualized return on cash188%