At least this much should be subtracted from their asking price if they are trying to sell FSBO, given they won't have nearly as much advertisment and nil representation.

But at some point, once you build up enough of a portfolio, its just easier to average things out.If you only want to buy a handful though, it might make some sense:i.e. 1,000 to 1,500 sq ft home - Capex is 80/mo and repairs 50/mo1,500 to 2,000 sq ft home - Capex is 90/mo and repairs 60/mo.2,000+  Capex is 100/mo and repairs 70/moAnd then you'd have some sort of multiplier for age. i.e1900 to 1950 - Add 20% to those numbers (capex 95/mo, repairs 60/mo for 1000 to 1,500)1951 to 1980 - Add 10%1981 to 2000 - No multiplier2000+ Subtract 10%Again, you'd really have to want to get into some analytics.

It's about the source of the funds and the net result in dollars to the REI when you subtract the dollars the REI spends (source of funds) from the dollars that comes to these same REI...and the source of the funds to pay the interest doesn't come from the REI...it comes from the tenant...it's called rent.Also, the REI isn't gaining anything when they pay for the equity. 

Max upgrade to get highest market rentOnce you find the gross rent, subtract 45-50% for expenses.That will give you a net rent number.  

Principal and interest are not included in the calculation, but taxes and insurance are because they are operating expenses.Vacancy, maintenance, utilities, property taxes, insurance, etc. are all operating expenses and part of the 50% you are subtracting from the gross income.

Once you know how much your buyers need to make you can determine the ARV then work backwards to subtract out all of the expenses & their return (repairs, closing costs (front & backend), commissions, holding costs, your wholesale fee & the profit your buyer needs).

Subtract your expenses from your total rent and you have your cashflow.If your happy with the amount of monthly cashflow, then you have a viable prospect.

2) To calculate adjusted cost basis, it's necessary to add closing costs and costs of improvements and subtract agent rebates/seller credits.  

Net Self-Sufficiency Rental Income is calculated by using the Appraiser’s estimate of fair market rent from all units, including the unit the Borrower chooses for occupancy, and subtracting the greater of the appraiser’s estimate for vacancies and maintenance, or 25 percent of the fair market rent."

And to continue what Josh C. was writing, once you have the comps, get an estimate of the repair costs plus 10%, and subtract that from the price, and subtract a little more for bargaining room.I have gotten estimates of work just by calling around to a few subcontractors (plumber, electrician, clean-the-nicotine-stained-everything guys, carpet guys) before I made an offer.