Understandable...With Rentals, you get all your income "Tax free" through out the year, as the gov. doesn't touch it. ( example $1500 rent x 12 months, looks like you made 18k )   But then it's time to PROVE that you didn't really profit  18k.. subtract the obvious mortgage, and then factor in repairs, depreciation, and anything else you can do to chip away at this...So maybe your bank account is up $ 200 / month in cashflow.. but not after repairs.. maybe you only made $25... on paper :)

You are taking a gamble because a bad tenant could cost you way more than appreciation, once you subtract out the transaction costs.  

When I'm looking for condo deals, I subtract the HOA fee from the rent, and then expect the remaining rent to be 0.8-1% of the purchase price.

From there I can look up comps online for the ARV and take a 25% discount from that minus repairs ie $200k x.75% = $150k - $25k repairs = $125k Wholesale Price (price buyer would pay)then subtract $5k - $10K for yourself  $115k - $120k is your offerThis allows me to have a solid idea when I look at the house so I just now have to do a condition inspection. 

I also then take all of those expenses (minus the management fee for the un-rented unit) and subtract out just the one units rent and see what it will actually be costing me compared to what I'm currently paying in rent!

Except of course you have to subtract the people that woulda died anyway. 

The utilities have to be subtracted out...it won’t meet the 1% rule.

@Matt Nico, the lender will take the income from the property, subtract a 5% vacancy factor(unless the vacancy in the area is higher according to the appraiser), then subtract the mortgage payment and other expenses such as utilities,  maintenance, etc and come up with a ratio(DSCR).

If everyone is getting equal principal and interest, subtract that amount from profit and keep the rest.

In fact, calculating cash flow is as simple as subtracting all of your expenses from all of your income.