Duplex Investment Question

[Brent Thurn]

My partner and I are looking to acquire our 2nd investment rental, and we have hit a bit of a snag.  

Our first deal was rather basic.  We purchased a single family foreclosure that was in decent/good shape.  Concrete Block Home, 30 years old, 8 year old roof, 3 Bed/2 Bath that had a 1.3% rent to purchase price.  It was simple, fit what we were looking for at the time, and it has turned out to be a really nice investment for us.

We recently put a duplex under contract in Vero Beach, FL and we have uncovered all sorts of issues, which gives us pause as to whether proceed.  We were projecting a 1.5% rent to purchase price ratio (with an absolute downside of 1.17% and a higher possibility of possibly 2.0% for seasonal rental rates).  So the cash returns would potentially be very healthy.  However, it is a bit of a fixer upper, needing minimum $5k-$10k in cosmetic repairs, its older (originally constructed in 1947), it is a wood frame house (which is terrible for insurance premiums being so close to the beach), and we just found out that the siding on the property contains asbestos (which would be probably set us back an additional $15k to remove and replace).

I'm reluctant to throw so much of our money, and be so exposed, into a house of this age. Does it make sense to try to wrap all of the repair costs into a 7/1 ARM? Or at this point, dealing with a property of this age (and having other exposures to lead based point, etc...), is it better to save the headache and walk?

Interested to hear from people that have dealt with in the past.

Thanks in advance.