Should I buy?

[Lou Jones]

Hi I'm looking for some advice / second opinion on if I should buy this property. I'm leaning towards an answer but curious to hear outsider thoughts.

I currently own a property with a 1200sqft (1925 built but redone in 2012) house on a 2500sqft lot. It has a lot of charm with modern updates and with some old flooring and brick. The property is in Brooksmith area near the greater heights.

the area has been booming as of late in terms of appreciation.

i have $314k left on my loan for this property. It is in decent shape but may need new a/c and structural leveling in next 5 years (appx $20k of repairs).

...

Most lots in my area are 5000sqft lots. My neighbor's selling their 2500sqft lot. their lot has a very old 648 sqft home with a detached old garage. No central air conditioning. Needs new roof among other repairs likely about $30k to make it nice. It is liveable now. But it needs some updates for sure.

They are willing to sell it to me for 200k. 

I own two homes right now that are valueable but do not have 80% or less LTV so i cannot take equity out. I also dont have a ton of savings liquid so in order for me to purchase this ill need to take $25k out of 401k and borrow 25k from family money. After i do this, i would utilize a rehab loan for 6 months then convert to investment loan where im looking at a $1700 a month mortgage. I would be able to rent this property out for about 1500 max for now and maybe eventually 1700. But it is so small (648sqft). Nearby nice 1 br apartments of similar square footage are renting for $1750.

At this point I would own two adjacent 2500sqft properties in a booming area. 

My debt would be total $460k ($310k one home, $160k new home).

I would be living in one and renting the other for no monthly profit. Paying about 200 to 300 a month to essentially just "have it" and let it appreciate and see what happens.

my short term goal is to increase savings cash assets and equity in next 5 years so i can buy a couple of investment properties that provide extra monthly income while increasing in value. I have one already making me 600 a month. But i want two more. 

My interest is this seems like a smart cheap purchase and the value will continue to rise, and it gives me flexibility to combine lots later to 5000sqft.

My concern is that the home is old, i wouldnt be making any money on it monthly, and i would owe so much on these two lots that even if i sell in next 5 to 10 years it wouldnt be a huge make. I would have to hold this for a long time.  And the home isnt getting any younger. 

Curious to see what more experienced developers on this forum think and how did you get your start? Did you have money already saved or did you get lucky? I would love to be able to buy a lot, build a new home on it then sell for a nice profit, but im curious to hear from you: how do you know when it is worth it? I know you can look at your RoR but how do you weigh agsinst other existing debts?

I'm leaning towards not purchasing this lot. Sometimes I feel the deals you pass up are the better financial decisions. I feel ill have just too much debt and not enough extra cash flow even though long term it would be a good return.

Welcome any help/investing tips.