Bloomberg has a good graphic on Blackstone's (world's largest private equity firm) model for acquiring a yield in real estate. I have added a couple of notes to the graphic (in yellow) as a reminder to the DIY crowd working on building their real estate portfolios that the expense side includes the labour cost of management as well as a 10% vacancy allowance.
In my May 2013 Case Study of buying a downtown Vancouver condo for a rental return; I have in the last most conservative scenario used a 5% vacancy and 5% management fee for a estimated expense excluding debt service of 39% of gross rents.
I'm willing to bet that Blackstone knows more about the real world than me so my advice to DIY real estate investors is to err on the high side when calculating your expense projections.
My last most recent comments on the current wave of big money buying up bank foreclosures are spanish-inquisition and us-housing-recovery-limited.
SCREEN TIP: If you want to view the image enlargement of the thumbnail above even bigger than the default and you are using Google Chrome as your browser, right click on the image enlargement and select "open image in a new tab" and then Ctrl + to enlarge the image even more.