Start with the values of comparable properties, subtract the costs (actual and imputed) for all the repairs, subtract the generally required profit margin, and that is probably pretty close to the value of the property before you start making the repairs.BUT, an appraisal is best.The value of preservation improvements required to keep the property habitable is sometimes just the cost.  

You can also pay for comps by using Real Quest.Then, you subtract from the ARV 35% right off the top.

So, let's say your house would appraise at $150k, the bank would give you up to $120k (80% of the value) - but you would have to subtract out the mortgage you still owe which would need to get repaid.

@Eric Smith To answer your original question: either stipulate it's empty and rehabbed when you close (seller won't like that) or figure out what it would cost you to do the eviction and rehab, then subtract it from your offer.

eg. the allowance of 45-55% for expenses would normally INCLUDE vacancy, not requiring you to subtract further!

You MAY get 1%/m gross in a multi that you also want to live in - not forgetting to subtract the percentage that you miss out on because of your occupier status - meaning that it'll be a fight to find something that'll cost you less per month than if you rented there - but I have confidence that you have the right attitude and foreknowledge to succeed.

I then subtract an assumed $20K for repairs (paint, carpet, seller's lies about repair costs, landscaping, etc.).  

Can I subtract it from secuity deposit?

Those property's NOI would sell for the same cap rate and a cost to cure adjustment would be subtracted below the line.Finally CAP RATE IS OF ABSOLUTELY NO USE AT ALL FOR SFR'S AND SMALL MULTI'S! 

I look at it this way: If you subtract the mortgage payment from the rents and the difference is less than you are paying for your own rent, it is worth it.