Negotiating Possible First Deal Flip or Flee?

[Kyle McVay]

Okay, while we were viewing a SFH my husband suddenly realized it was actually a duplex that had been converted into a SFH. It was originally a 1 bd/1 ba duplex that was converted into a SFH around 2014. The kitchen is still intact and to turn it back into a duplex all we need to do is provide a barrier for a doorway, (so make it into a closet or throw up some drywall etc... ) and add kitchen cabinets, counter, sink, appliances etc.. After that there is additional rehab that is needed because it's not in great condition. We'd have to put at least $25K into it (maybe more we haven't had an inspection yet). This would increase the value of the property by between 27%-33% (according to our Realtor) so at first it seemed like a no-brainer and a big win for our first property.

I've even got a contractor that will be available around the closing time for some of the bigger projects like moving the door, putting in windows...

But when I ran the rental numbers they aren't great. The rent is low in this area. This house is on the edge of a neighborhood that is gentrifying, 2 of the 6 houses on this street are nice. The view from the front yard is back of run down duplexes. I'm concerned if we buy the house and we try to flip it that it won't sell because the price tag will be too much for the rent it collects. If we try to buy and hold it only cashflows $55 with is COC Return of 1.4% (well below the 8%).

We were trying to negotiate the contract. But now Im wondering if we should walk. What do you all think?