I just did my senior project on a real estate investment. (I just graduated with a bachelors in finance and am going into the masters in finance program) The thing with analyzing the investment is to know the market you are in.
Example: We looked at a rental property in Tucson, AZ. We determined fair market value for rent based on square footage and distance from the UofA campus, among other things. After estimating expenses (there are always more than you think), we determined that much of the return comes from the sale of the property. However, the sale of the property is where much of the risk is. So, in this market it was a below average investment.
If you go ahead with it, there are some things you need to think about: your "ideal renter", the holding period for the property, how it will be financed, what your ideal return would be, average rent increases in your market, the base industries in your market and their trends (because employment ultimately drives the need for housing), how you will deal with repairs to the house (ie, you do it or pay someone else to do it)....
There are more considerations, but I just wanted to remind (or make you aware if you weren't) of some. If you need some good websites for some of the market data, feel free to PM me; I've been meaning to bust out some of my text books after I paid through the nose for them. I caution people from jumping right into it because they usually do not take everything into consideration (a family friend just got done with a whole rental property mess).
If you are truly going to be in it for the "long haul" keep in mind that it is impossible to predict real estate property values past 7 to 10 years. Good luck with it if you decide to do it.
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