Understand financial formulas, present, future value is about as complicated as it gets and we have calculators for that.

Cap Rates vary and can be derived with numerous variables that impact the cash flow/purchase price formula.

If a property costs too much, you won't get cash flow out of it.Not sure if this helps, or is the right time to show it to you, but here is the formula I use every time I evaluate a rental property for potential purchase (you'll have to include costs for reno in there--put it into the total purchase price).http://www.biggerpockets.com/renewsblog/2013/01/19...That's all in terms of cash flow as a response.

ACTION, ACTION, ACTION!!!! This is my secret weapon.(shhhh)..You must take action for anything to happen...It can't be done thinking about it, wishing for it or just doing nothing. Yes, I made mistakes along the w...

Its not much better, but am I using the right formula?

My formula is PITI cant exceed 40% for buy and hold.

This is the best, most common indicator of value.2) Income approach: The income the property will generate yearly multiplied by a formula for what things sell for in your area.3) What it would cost to build it and what the value of the land is.

The funny thing with this "rule" is that so many people want to "break" it or ignore it and come up with a number that fits their formula for profit.Do with it what you will, but it has been put forward by many sources who aggregate across a number of doors, that, over the life of a rental your costs will be around 50%, there are things a person can do to bring it down (self manage, maintaining and repairing the property yourself etc).It's not a case of someone buying a property and people jumping up and down about "the 50% rule has been broken".

Is there a formula you would recommend?

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