Buy and Hold Help with Analysis

[Jeff Ihnen]

I need help and advice on my current property of interest. I am very conservative in my RE investing for the time being and do not have much loan/risk tolerance.  With That being said I just want to focus on buying 1 Rental to start out with, Learn all I can, Increase the cash flow as much as possible, all the while saving money and preparing for my next deal.  My goal is to pay off this first rental completely before i buy another one and then do the same for that one.  I know this is a lot slower pace to great wealth but at least for the time being I do not want much debt or properties to deal with.  With that being said here is the current property i am interested in....

1/2 of a duplex for sale.  The property has a 2 car attached garage, 3 beds, 2baths 1149sqft and is in a great/desirable location.  It was originally listed at 127,000.  Now the property is listed for 122,000 and has been on the market for 3 months.  I believe it is due for another price cut very shortly.  I believe the property is over priced and needs all new flooring, updated both bathrooms and kitchen.  All in 15k-20k in repairs needed.  Rent for this property would be between 1,000-1,200 a month.

CapEx 200, Repairs 50, Vacancy 50, Property management 100, property tax 180, Insurance 80, Trash pick up 15-----All expenses 675/month-------$405 Mortgage payment (If i get the home for 100k w 20k d.p.) For a grand total of 1080/month in expenses. (i would manage myself for 100 less a month but wanted to include it).

I Want to make this deal worth it because while you cant bank on appreciation, this property would at least have the opportunity for that.  It is in a good area, that will hopefully attract better tenants with lower turnover and headaches.  This seems like an awful deal but i want to make it work. I wanted to originally offer 90k for the property but didn't want to offer to low and offend the buyers and not make them want to work with me.  With a top dollar i would be willing to go between 100-105k.

I was considering refinancing my current home and pulling the cash out of it to put in the deal.  Depending on what it appraises for i assume i could come away with 30k-45k.  With my savings combined with this i could get very close to paying all cash for property.

IDK lots of thoughts here. My Goal is to pay off property ASAP, Assume 50% rule and therefore cash flow 500-600 a month ASAP once property is paid off.

[Marcus Narvaez]

You don't want to have the property paid off fully, as that kills your cash on cash return since you are completely unleveraged.

Honestly this deal looks no good just from what you've said:

1080 in expenses for rent from 1000-1200 a month which means with 20k down at 15-20k in repairs you are cash flowing $120 a month at best for 35-40k cash down which is only 4% cash on cash return (1440/yr for 35k invested). Sure you'll cash flow $100 more without paying a property manager, but you need to consider that $100 a month extra your fee to yourself for self managing, not part of your ROI.

"I want to make this deal work" The deal shouldn't be forced into working.