You must charge a rent high enough to cover your expenses and take home a profit. The cash flow formula is simple. Rental income minus expenses minus mortgage. The 50% rule for expenses includes property management.
Rental income less expenses less mortgage payment. My goal is 4% because I think real estate appreciates around 3% over time. If you add 4% in cash flow with 3% in appreciation, that equates to a total return of 7% on your capital. Anything less than this, and it would be better to use that capital in a higher-yielding investment.
As with any investment, rental property isn't going to produce a large monthly salary right away, and choosing the wrong property could be a catastrophic mistake. The 3% you may have bet on the house you currently live in is not going to work for an investment property. You can then use this cash for whatever you want, such as renovating the home or making additional investments in other properties. Once the rehabilitation was complete, I would purchase the home as a traditional investment property with a 20% reduction in value after rehabilitation (ARV).
If you want to invest in a rental property but don't have the money (or the experience) to make it happen, you might want to consider a real estate company. A rental property that meets the 1% rule will give you a return on investment of approximately 6% on a cash purchase. In general, a good rule of thumb is that if you can rent a property for 1% of the purchase cost, then it can be a worthwhile investment. It includes capital accumulation and cash flow, and compares it to your initial investment to show what the rates of return would look like if you sell the property at a specific time.
Learn how to buy rental property with no money so you can start investing in cash flow real estate and be financially independent. You should sit down with someone who has experience investing in your area and then define what the minimum return on investment from an investment in that area would be for you. DO NOT invest in an invested property that flows cash by telling yourself you are doing it because you think it will be appreciated.
