It depends on the terms of your financing such as amount of down payment and the amount of debt you will have on the property. If you are paying cash, you could pay any amount and your cash flow would be equal to your Net Operating Income (NOI). If not, your cash flow is your NOI - debt service.
You first need to calculate your Net Operating Income (NOI) by subtracting all expenses from the gross income of $1,200/month ($14,400/yr). You included tax expenses of $4,000/yr but did not include insurance, maintenance, vacancies, etc. The taxes seem high at 28% of the gross income, which would probably make your total expenses 40-50% of the gross income.
To get the amount of your loan payment you deduct your desired cash flow from the NOI, which would be $7920/12 = $660/mo. So $660/mo - $200/mo = $460/mo would be your maximum loan payment.
Use the $460/mo. to determine your maximum loan amount based on your loan terms.
I just looked at a duplex near my house. Its has 1 bedroom up and 2 down with a communal basement. I know that I can get $1200 a month for rent. The taxes are $4000/yr. It needs about $15000 worth of work. I was wondering how to calculate the maximum price that I could offer and still pocket atleast $200/month for myself.
if you go through your analysis and come up with a price that will get you the desired $200 in monthly cash flow, you may be selling yourself way short, or you may be dreaming. is all depends on your market.
dig up some comparable duplex transactions in the area and get a feel for the local market.
here’s what I mean: if ths property were located in the lower income part of Longview, TX, it might price out at $20,000. put this same property in a lower income part of Oakland, California, and it might price out at $350,000.