Is this a good deal?

[Logan T.]

Hey everyone, First post regarding a possible first purchase.  I am new to real estate investing and my wife and I have been looking for some rental properties in the Northern Middle Tennessee area.  We are currently under contract on a duplex in Clarksville TN.  I wanted to give some details to see what you guys think about this deal.  Our goal is to create a portfolio of rental units for retirement.

All feedback is welcomed, and please don't assume I know anything.

This duplex is currently occupied on both sides. They pay their own utilities. Each unit is a 600 sq ft 1 bed 1 bath, built in 1951, has cheap siding, 10 year old A/C unit, needs new water heaters, and some other repairs that I have estimated to be around $7k in total.  The biggest of repairs for a tree removal at $2k.  The rent for each unit is $450 with 1 unit on a month to month after 1 year lease was up this month.  The other unit is on a partial Sec 8 voucher,  with only $80 coming from the voucher and the rest being covered by the tenant.  This unit has been occupied with the same renters at the same rent rate for 4 years with their lease expiring in November of 18.  I have spoken with 2 management companies with an 8% management fee who report the rent is under market rent for the area and would plan to start the rent listing at $550 with expectations that it might have to be dropped to $525 to fill the units.  Only 1 unit is currently approved for Sec 8.  This duplex is in a very poor/rough neighborhood relative to this city.  I would see practically zero return on the property because this area is so rough/crime riddled. 

The listing price was $75k, and we are under contract at $71k. They have offered us a $3k repair allowance towards repairs, but will not complete any repairs. This is a cash offer on our end up front, but we would pull equity out to get it back into our other investments, ideally leaving about 40% equity in the duplex. So we would have about 60% on conventional loan probably within a year. In looking at HUD calculations, the fair market rent in the area for an efficiency is $560 and for a 1 bedroom it was $640 If I am remembering those numbers correctly. Our plan would be to raise the rent on the month to month renter to get it to market rent. If that renter were not able to stay we would take the risk of losing the tenant to get that unit approved for Sec 8 with a voucher tenant in place. We would then do the same to the other unit were tenants have been occupied for 4 years. We would raise to market rent and if we lost them, we would try to fill with a full vouchered tenant. If both properties are renting at $550 a month this cash flow sounds excellent. If I am only at $450 a month, is this property worth it from a cash flow only perspective? My concern is that we have planned to be conservative adding 1 rental currently. We probably won't add another for 18-24 months. Is this the one that I should pull the trigger on. Is it good enough to be my 1 deal for a bit?