When we bought our flat around 3 years ago (5.5 rooms, 140m2, top floor with great views and 100m2 terrace, own washing machine/dryer etc.) which we bought explicitly to rent out, our calculation went something like this:
1) how much of our own money did we have to invest? (270K)
2) leaves how much on which we have to pay interest for mortgage?
3) which type(s) of mortgage do we want? (fixed, variable? costs of each? risks of each?)
4) location of the flat - desirable/not desirable? (transport, schools, shops, views, traffic etc. etc.) - how much can we charge?
5) within the next 2 years we will have to pay anually into a "renewal fund" for the block of flats to cover future renovation costs. That money will have to be in place then out of the rent we earn now.

Based on those considerations we calculated an annual rental sum of X Francs. We are now getting a small return on the money invested (with the emphasis on small), the mortgage payments can be made on time, our tenants are happy with their rent and we can put money aside to make those renewal payments when they fall due. Our return will be if and when we sell the flat say in 10 years.