Market rent - 50% , then subtract loan payment using prevailing interest rate for your size of loan (i.e. jumbo). 

Subtract the Rehab estimate and Holding/Closing costs (using $10K for this example).  

But if I hire him to do the work then the $100 is subtracted from the final payment.

It will show what the market rents for your place should be, at that point the lender will take the market rents, subtract 25% and then subtract the PITI of the loan.

If you subtract that from your rental income your property itself is probably negative cash flow.

@Chris - I think I understand what you say, but why would they subtract rather than add 1 day of interest?

On a flip, take your After repair value and subtract your rehab costs, minute the percentage you'd like to make on the deal.

From Biz findings "For losses of trade or business property, or property used to produce rentals or royalties, once you've calculated the amount of your loss and subtracted the amount of your reimbursement, the remainder is your deductible loss (or gain)."

Then subtract the $124,000 and you're left with $12,000.

The COC ROI will be 14.88% and the monthly cash flow will be $535.95 after subtracting for vacancies, repairs, cap ex, taxes, insurance and P & I.