Need advice on potential deal!

[Jocilyn Oler]

I received a counter offer on a property and I would like others' opinions on if you would go forward with the deal.  I guess the question is...do I go under contract today and fine tune my analysis of the deal in the next week? Is 5-8% return worth it?  The market is super high, which is why I hesitate, but the house is in an awesome location.  Your thoughts and advice is appreciated!

The house is a great location in a college town with two very close universities.

Here is an overview:

Total Purchase Price = $237K

Beautiful single family home located close to town college. Great for entertaining. Features open floor plan, granite countertops, sprinkler system, fully fenced side yard, abundant storage, and attached garage. Newly updated Master Suite including walk-in closet and exterior entrance. Tile, hardwood, laminate, and carpet flooring throughout home. Appliances include dishwasher, garbage disposal, refrigerator, stove, washer and dryer. Home includes new roof (2014) and neatly manicured landscaping.

Facts and Features

Year Built 1948

Sq footage: 1613 sqft

Heating: Forced air

Cooling: Other (4 window units come with home)

Lot: 6,098 sqft

Interior Features

Bedrooms

• Beds: 4

Heating and Cooling

• Heating: Forced air
• Heating: Gas
• Cooling: Other

Basement

• Partial basement
• 223 sqft basement (basically the trap door entrance and has water heater, furnace and some storage)

Appliances

• Appliances included: Dishwasher, Dryer, Freezer, Garbage disposal, Microwave, Range / Oven, Refrigerator, Trash compactor, Washer

Flooring

• Floor size: 1,613 sqft

Math outline:

Note: These Cash on Cash Returns (ROIs) are figured based off as if one person were to put in all the money. If we all put in money the risk is less and the returns close to the same.

They said that they lowered rents because they had sister's friends in there so their rent total = $1,580/month

Annual gross based off "low" rents = $12,696

Cash on Cash ROI = 8%

When considering higher rents (which seller assures me we could get) we could gross 1700-1800/month

Annual Gross = $20,400-21,600

Cash on Cash with these higher rents (with below operating expenses deducted each month) would be = 8.6%

Operating Expenses:

Tax: $84.83/month

Insurance: $55/month

5% vacancy: $50/month

5% repairs: $50/month

Capital Expense allowance: $183/month

Prop. Management allowance: $100/month

Total potential operating expenses= $522.83

Cash on Cash ROI c/ expenses considered (based off "lower rents") = 5.3% 

Average utilities (gas, electric, sewage, etc)

Summer: $330/month Other months: $200/month

Tenants pay this.

Internet is through Google Fiber and is free for this area.