What Do You Think About These Numbers

[Wade G.]

I am tired of buying properties that basically need to be gutted. I am a landlord that has in the past bought SF properties like a rehabber would but instead of selling them I keep them as rentals. This is sort of a long post with alot of numbers but I would like to get some other people's views on this strategy and I appreciate anyone that takes the time to examine the details.

-Buy at house from a motivated seller for 100k that would retail for about 115k.
-20k down
-4k closing cost
-4k some repairs before rent ready
-30 year loan at 5%
-so all in for 28k
-10 year expected hold time

-Rent for $1175
-taxes $290 mo
-insurance $120 mo
-mortgage payment $430 mo
-total is $840 mo PITI

-above numbers give $335 mo cash flow
-after 50% rule = 157 mo but I adjust this up a little because I don't use a PM so I figure $195 mo is acceptable (maybe!).

195 x 12 = $2340 yr cash flow
$2340/28000 (cash out of pocket) = 8% return per year over the 10 year hold time

8% is not worth it to me considering all the hassle

If I could add on appreciation (which I know we can't depend on) it would be better. So how about adding in 1% a year, so lets figure 10k over ten years (for ease lets just say 1k per yr).

Now if I sell in ten years I figure my profits from cash flow (23,400) and appreciation (10k) and the 15k in equity when I bought comes out to ~48k.
-That 48k spread over 10 years is $4800 yr
-4800/28000 (cash out of pocket) = 17% return each year over ten years. That is not so bad.

I did not include mortgage pay down over the ten year period because I recognize there will be selling cost and repair cost upon sale. So I figure the 15k in mortgage paydown abolishes itself upon sale. Any tax advantages I do not consider and actually the 17% may be less due to capital gains taxes and depreciation recapture upon sale. I also am not considering rent increases or insurance or tax increases for this example. That would just make it too complicated. I understand that less out of pocket would raise my returns but thats for a different scenario.

So in the above scenario am I breaking any accounting laws, or formulas, or is there something I am missing. I have no accounting skills, suck at math, and am in general not a very smart person so I figured it would be good to post this and see what others think.