Help me run these numbers on a buy-and-hold rental please?

[Tony Maro]

I don't want to fall into the trap of buying because I feel I have to, but that said I've got cash sitting around drawing 0.01% that I need to do something with and this seems to be the best in my area, other than a distressed property I'm planning to snatch up if the current under-contract falls through.  And no, I'm not interested in investing in other markets right now.

This is on a small 3BR currently listed at $120k.  Built in 1980, renovated in the last few years and move-in ready, doesn't need renovations at all.  Comps are real hard here since it's a small town, but on the same street a similar house but brick outside instead of siding sold for $105 last september and was listed originally at $115.

I believe I can get $850 rent without any problem - probably $950, based on local market rents.  It would be my first deal and I don't have a mortgage currently, so I've got traditional financing pre-approved at 4.8% with 25% down.

Here's what my numbers are looking like:

Mgmt fee:  $75 (going to manage myself)
Maint: $50 (renovated in the last 3 years)
Replacement reserve: $50
Taxes: $113
Insurance: $110 
PI: $377 (assumes $95k purchase)
Total:  $775 (not counting vacancy)

My spreadsheets show a cap rate of 5.7% and COC of 3.49% with vacancy included. I'd like to think things will end up being better - less maintenance fees and less vacancy, but I'm trying to consider a reasonable worst case baring something like sewer problems.

The town has a medical school, and students have a hard time finding places to rent - there's a crappy set of apartments near the school that rents a tiny 3BR for $800.  Run-down 3BR houses in town tend to rent for $800.  Most med students I know with families end up driving twice as far as this house to find something to rent for $950 or less.  I've been told by students that the average a student pays for rent is $600 (2BR) to $1000 (3BR).  I also have an "in" with the students and should have no problem finding tenants.

It's certainly not a home-run, but the numbers are better than any other property on the market here I've seen.  Given there's houses selling for $160k that are currently rented at $800, nothing else gets closer to the 1% rule.  The others that the numbers might work better on are 100 year old houses that appear to have serious structural issues that I don't want to try to tackle as a first property.