The formula & the subsequent rearrangement:Capitalization Rate = Net Operating Income/Asset Cost *Now multiply both sides by Asset Cost to remove Asset Cost from right side and place it on the left side results in:(Capitalization Rate)(Asset Cost) = Net Operating Income *Now divide both sides by the Capitalization Rate to get:Asset Cost = Net Operating Income/Capitalization RateI know most people on the forum understand this, but it may help beginners unfamiliar with the formula.The problem with the property you've posted:As Joel Owens notes, the operating costs of 75,000 (17% of gross income) are completely unrealistic.

Essentially what a yield return is; a Gross Rent Multiplier.

This is then multiplied by a number determined to be the appropriate cap rate for the property to arrive at a valuation.

//End quoteThe precise formula is that your loan-to-value ratio multiplied by your annual constant must be lower than your cap rate to get positive cash flow.Note that your cost of equity in a WACC calculation will differ from every other investor so the price YOU will pay for the investment will also differ from what they will pay.

Research the terms gross income, net operating income, gross rent multiplier, and capitalization rate.

Lenders typically want >1.25GRM, Gross Rent Multiplier = Purchase price / annual revenue (assume 0% vacancy).

Then multiply that number by the condition of the property.

Multiply that by $910k and your friend will come out roughly even or better in a tax free Roth!!!!

From my experience it is really the same as issues I would be dealing with for a SFH just multiply by 2 or 3 or 4 times.

The rents could be increased a bit or upgrade this or that, but to get to 1.5% or 2% gross rent multiplier after improvement is almost impossible.