The normal formula for purchasing a property is to take a percentage of the market value and then subtract the repairs.

You subtract out ALL expenses.

To do this subtract price of land the house is on, and divide by 27.5yrs to get yearly depreciation amount.Taxable income = Rent - costs - (50000 - land )/27.5Then this amount is taxed at marginal income tax rate for federal and state.

They did try on the convincing like you said...and yes she is mainly a residential realtor.She said there was $94,000 in NOI....she literally subtracted out taxes and insurance from 100% gross rents...lol

Maybe start from a "quick sale" ARP - After Repair Price - and then do the subtractions, remembering to allow for cost over-runs and unexpected expenses.You need to keep some realistic expectations on your profits, also.

Sell for 350,000 = 50,000, then subtract out closing costs, etc = 40,000. b- adding a second floor to it. 

Hi @Kevin Siedlecki,Here's my expense breakdown:8% Vacancy = $88Taxes I estimated at 2.3% value, which is $142Insurance .4% value, which is $25Property Management 10% of rent collected (subtracting vacancy) = $1012% cap ex and 3% repairs (as a percent of rent collected) = $50Annual expenses for things like rental license and inspections $260, so $13/mo.Total expenses $330, rent collected $1010, $275 mortgage, $400/mo cash flow.  

If I get a counter offer, I will get more exact with these numbers)profit: Subtract out whatever profit you want to make.

For gross rents, again $2,200 ($1,100 x 2) would be a negative cash flow when subtracting $104 for vacant and assuming a 30% expense ratio with 80% leverage @ 4% interest and 30 year amortization, but have your checked the zoning?

Subtract this amount from the $ amount the lender will net.