(Hard part) determine value adjustments for each difference (1 more bedroom adds $5000 to value, 300 less square feet subtracts $15,000, etc).  4.

I would run numbers subtracting monthly mortgage, CapX, repairs, PM, taxes, and insurance.

Ashwin - Also just saw that you added vacancy to your gross rental income instead of subtracting it.

You'll want to subtract the value of items the house needs ...Go with the high estimate on the roof.Get an estimate to replace the HVAC, including updating the A/C to newer refrigerant.Get an estimate on replacing the hot water tank. 1966 is WWWAAYYY too old.Get an estimate to fix the electrical panel / issues.Subtract all of that from what the FMV would be if everything had already been fixed / replaced (ARV).

All of them used faulty comps / went too far back in time / overstressed neighborhood subtractions. 

Take that amount and add capitalized improvements and subtract depreciation. 

Until then, the added payments subtract from your current CF and in fact reduce your cash flow. 

Taxes and insurance are not excluded.So now subtract insurance from the net income, and subtract what the taxes would be at the higher value (sale price) which is likely considerably higher than the taxes you are paying.  

And should we subtract this from Gross income to see eligibility?

for example, if land was worth 200k (by county assessor in 2022) but apprasied at 50k at time of purchase in 1988, which number ultimately gets subtracted from the final sale price to calculate the capital gain?