Noobie Analyzing Cash Flow Rental. Am I doing this right?!

[Sean Howell]

Hey guys. I've been analyzing some deals in Memphis that appear to be over the 1% rule but do not appear to cash flow? I just wanted to make sure I'm doing this right or if I'm overestimating some things here.

ARV of the property is $75,000 and rent is $800

Mortgage ($60,000 loan with 5% interest rate over 30 years): $322

Taxes: $106

Insurance: $100

Capex: $100

Maintenance (lawn care/small repairs): $100

Property Manager (10%): $80

Vacancy (5%): $40

Total Expenses: $848

As you can see, based on these numbers the cash flow is negative. Would it be safe to say that at these lower rent amounts the number needs to be more like 1.5% or higher for rent? After analyzing a few deals, since the Capex, taxes, and insurance don't appear to scale proportionally with the cost of the house, the higher rents say 1.4k+ appear to cash flow better using the 1% rule. I'm sure there are tons of people making these lower rent houses cash flow, but I don't understand how they are doing it. Am I overestimating my costs too much, or are they getting such a ridiculous deal to the point where they're paying like $100/m for mortgage? I don't get it.