I second everything Surveyer just said.
Would add to it that you need to include in your projections ALL the costs involved in owning rental properties. Most often overlooked:
1. Vacancy. Not just the time advertising, showing, and waiting for the tenant you’ve picked to get around to moving in, but the prep. and fixup time before it is even ready to show.
2. Opportunity cost of your down payment.
3. A monthly reserve set-aside for major repairs.
4. The cost of your own time: maintenance, management, headaches.
5. Transaction costs getting in and getting out.
6. The postponed cap gain taxes due when you sell (CA cap gains tax is, I believe, the steepest in the nation).
