One of the most important aspects of the investment game is creating a positive cash flow from your rental properties. The basic principles apply: buy low/sell high; cover your monthly expenses with your monthly rental payments; go to the bank a happier, richer person. Setting up just how much you want to walk away with each month, however, isn’t as simple as adding up all your expenses, tacking on an additional 25 percent and sitting back waiting for the tenants to move in.

There are two basic systems for determining the rent to charge. The first is “return on investment,” directed by how much money you want to make on your investment plus the amount of annual expenses for the investment. For example: if you put $20,000 down on a property and you want to receive a 10 percent return on that down payment (total of $2,000 per year); First add up all your expenses (say, $12,000 per year for mortgage and $2,000 for maintenance and upkeep). Then add in the desired annual return, thus you would need to bring in $14,000 per year in rental income to meet your goal — ergo, the rent charged would be $1,200 per month.

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