Wife wants me to buy her Grandparents' home to rent after 1 yr..

[Clifton Monte]

It's a family home in Richmond, Va that was purchased and renovated from a tax sale. This would be our 1st home, but we'd be relocating in 1 year.  Below are the rental calculations I've come up with. Before I break the news to my wife, if ANYBODY can tell me how this ISN'T an ABYSMAL deal I'd greatly appreciate it, thanks!!!

Monthly Income:      Monthly Expenses:       Monthly Cash Flow:      Pro Forma Cap Rate:
$1,550.00                     $2,248.06                       -$698.06                            2.35%
NOI Total Cash Needed Cash on Cash ROI Purchase Cap Rate
$8,124.00                     $20,349.00                      -41.17%                            2.35%

======Financial Projections========

     Total Initial Equity: -$334,650.00

     Gross Rent Multiplier: 18.55

      Income-Expense Ratio (2% Rule): 0.44%

     Typical Cap Rate: 2.35%      Debt Coverage Ratio: 0.49

ARV based on Cap Rate: $345,000.00

=======50% Rule Cash Flow Estimates=======

     Total Monthly Income: $1,550.00

     x50% for Expenses: $775.00

     Monthly Payment/Interest Payment: $1,375.06

     Total Monthly Cash Flow using 50% Rule: -$600.06

========Analysis Over Time==========
Annual Growth Assumptions
    3%                   2%                3.4%
Expenses         Income       Property Value
_______________________________________
                                        Year 5
Total Annual Income        $20,536

Total Annual Expenses      $28,645

Total Annual Cashflow      -$8,109

Cash on Cash ROI -39.85%

Property Value                 $407,776

Equity                              $111,347

Loan Balance                   $296,429

Total Profit if Sold            $49,939

Annualized Total Return       28%

[Theresa Harris]

If you are literally only get $1550 a month for rent and the mortgage + taxes are what?  You have $1375 for mortgage, but does that include property taxes?  There is the emotional attachment because it is her grandparents home.  You'll end up paying to have someone live there.  If houses in the area are going up and there is strong rental demand, your rental income may go up faster.