How important are expenses when analyzing deals?

[Justin S.]

I know the importance of adding expenses when analyzing properties. My friend who is a real estate agent just started investing in rentals and said that she does not include expenses like property management and cap ex when analyzing deals. She plans to set aside $100 a month for repairs after paying the mortgage(including tax and insurance). She said there is no point to worry about repair costs because it is a tax write off and many things can be covered by the insurance. Without considering these expenses into her analysis it's no wonder she comes up with a 25% yield on a duplex. I just wanted your guys thoughts on this because I was taught to add all expenses to your analysis and that expenses sometimes eat 50% of the cash flow, but she believes differently and claims to get $600 cash flow on a $1300 rental with a mortgage payment of $600 Rent: $1300 Repairs: $100 Cash flow: 600 Mortgage: 600(includes tax & insirance)