Figuring the value of a rental home
Currently, my husband and I keep most of our $ in CDs. We assume that inflation will eat away at that pretty rapidly so we are looking for a house to buy for a rental. Somewhere I read that dividing the cost of the house by 15 and then by 12 will give me the rent amount I would need to receive to show a profit. Does anyone know if that really is a good rule of thumb? This method doesn't seem to make a provision for taxes and insurance unless it is built into the number 15. When looking at the balance sheet can one subtract the amount paid on the principle from the debit side? How about the amount one realizes from depreciation? Does that get plugged in anywhere?