The formula is just a starting point for you but if the numbers don't work for you walk away; run if they are completely unreasonable.  

@Tom MartinowskyDetermining the appropriate price for a rental can be a big hurdle at first but is something that can be overcome with the right knowledge and research.

All the hurdles that young people face today that keep them renting or living at home are still present.

If you're not licensed, you can likely still cut some of the expenses by working an agreement with your realtor to receive full commission on the purchase of the property and a reduced fee on the flip (since your agent would get 2 commissions on one property, it's not unreasonable to ask them to take a small reduction on the back end of each one. 

Your 3.5% down payment would be $4900 plus the 1.75% mortgage insurance would be $2450, which leaves $2,450 for all the other costs, which does not sound unreasonable.  

A lender has more data and information than you do, all lenders are conservative and can spot unreasonable amounts in a pro-forma.

Yes, that's a very simplified example, but not unreasonable.

By the way, 30 days is not unreasonable at all, to determine if he can develop/build what he wants, and any requirements associated with it.  

Feel free to reach out anytime you need to get past any hurdles along the way!

My concern is that it feels unreasonable, almost like a "bait and switch", But I don't want to sustain a rental loss either.Since I can easily find new tenants, and will have little vacant time, is raising it and letting them move if necessary a better tactic than doing a partial increase as consideration fir them as good tenants?