ACTION, ACTION, ACTION!!!! This is my secret weapon.(shhhh)..You must take action for anything to happen...It can't be done thinking about it, wishing for it or just doing nothing. Yes, I made mistakes along the w...

Its not much better, but am I using the right formula?

[ARV - rehab] * 70% = Maximum Allowable Offer (MAO)MAO - fixed costs (purchase & sale costs) - holding costs (utilities, ins, financing, etc) = (potential) Net ProfitNet Profit / Total Investment = ROI %That's the formula I use for a Wholesale (would also need to include your wholesale fee in the Net Profit calc) or Fix & Flip deal. 

Rich Dad Poor DadRich Dads Cash Flow QuadrantRich Dads Increase your financial IQThe Real Book of Real EstateThe ABC’s of RE InvestingThe ABC’s of PMRich Dad RE Tax AdvantagesThe E-MythThe 4 Hour Work Weekhttp://flip2freedomacademy.com - free e-bookFlip2freedom episode 77[http://www.flip2freedom.com/a-3-step-formula-to-a-successful-balanced-and-insanely-profitable-2012/] - podcast - LISTEN TO THIS TODAY!

The law allows for any formula, but typically the amount of equity would be what you want to go with.

If a property costs too much, you won't get cash flow out of it.Not sure if this helps, or is the right time to show it to you, but here is the formula I use every time I evaluate a rental property for potential purchase (you'll have to include costs for reno in there--put it into the total purchase price).http://www.biggerpockets.com/renewsblog/2013/01/19...That's all in terms of cash flow as a response.

Understand financial formulas, present, future value is about as complicated as it gets and we have calculators for that.

Cap Rates vary and can be derived with numerous variables that impact the cash flow/purchase price formula.

If it's not then the bank will have a formula to calculate your schedule E income.Oh and if you don't live in the home you can claim the income on your taxes.I hope this helps.

My guess on your folks long term success would simply be the magic formula of rising rents over time, reducing debt (and increasing equity) as your tenants pay down your mortgage, and in, many areas, handsome price appreciation....Over the long haul it has been an effective formula for many investors even if you can't articulate it (the home prices and rents have just gone plain gone up over 30 years...)Best of luck Philip....