I would recommend evaluating the home purchase as an investment like any other.
Does it pass the 1% rule test?
$500,000 purchase price, it should rent for 1% or more per month. $500k x 1% = $5,000 per month.
1. Does it cashflow?
Estimate expenses
Gross rent: $5,000
Fixed Expenses (electricity, water, sewer, trash, garbage, HOA, insurance, property taxes):
Variable Expenses (vacancy 5%, repairs/maintenance 5%, capital expenditures 10%, property management 10%):
Financing Expenses (interest, principal, PMI):
Cashflow = Monthly Rent - All Expenses (including principal and interest) a gool rule of thumb is a property should cashflow at least $200/mo, you might be comfortable with less
2. Financial Metrics
Net Operating Income (NOI) = Annual Rent - Annual Expenses (not including principal, interest, PMI)
Net Income After Financing Cost (NIAFC) = NOI/12 - (Monthly Interest + PMI) (a good rule of thumb is this should be at least $100 per property per month)
Cap Rate = NOI / Total Purchase Price. A good rule of thumb is this should be at least 7%
Cash on Cash Return: NIAFC / Total Cash Invested (down payment, closing costs, repairs, loan fees). A good rule of thumb is this should be at least 12%
Gross Rent Multiplier = Total Purchase Price / Annual Rent. lower is better, 8.33 or less meets the 1% rule
Debt Coverage Ratio: NOI / (Annual Principal + Interest payments). a good rule of thumb is this should be 1.25 or better
Run these numbers for the property and you will have a good idea if it is a good investment even if you don't choose to live there in the future.