Analyzing Cash Flow Pre- or Post-Tax

[Felix Piper]

When looking into purchasing a rental property, do most of you look at pre- or post-tax cash flow? Looking at a few properties in Los Angeles county and very difficult to cash flow pre-tax, so was wondering how they sell for so much. Is it purely an appreciation investment? Or do you consider mortgage interest, property tax, and depreciation deductions when calculating cash flow?

[Denver McClure]

@Felix Piper I don't recommend factoring in mortgage interest or depreciation on cash flow. Yes, you should factor in tax as a monthly expense to understand the true cost of the property each month. I would also add in a 20%-30% budget (on rents) for vacancy, CapEx, and repairs. Last thing I would ask is wether or not you are hiring a property manager which will run around 10% per month.