At what point doesthe rental income become most important?

[Amos Raymond]

How much should one overpay (price per sq. ft) for a property potentially bringing in a generous return? Is cash flow so important that you overpay though asset appreciation is likely in a rising real estate market?

At what point does the rental income become more important that appraisal value of property?

Facts:

Duplex in good structural condition (electrical, plumbing, foundation) but would need possibly $50k in cosmetics & updating if we were to rent out to average renter as opposed to steady stream of college students for the past 10 years.

1. Unit 1: 3 BR, 1 BA. Unit 2: 2 BR, 1 BA
2. Asking price $329,000 ($150 sq-ft) with other duplexes in the area are going for $120 sq-ft
3. Property has been rented out to local college students who pay individually generating rental revenue of $3,000 monthly
4. If partner and I could purchase and not upgrade/rehab, renting to same college students then estimated monthly cost with debt service (assuming 4.5% interest rate & 25% down) is roughly a few dollars shy of $2k leaving a net profit of about $1k
5. Concern is for CoVID and schools moving to an on-line model and force the $50k rehab/upgrade and possibly only brining in $2700 monthly which would only bring about 6.6% cash return ($78K down payment + $50k rehab cost)
6. Real estate market in Memphis is rapidly progressing now as it is following Nashville’s lead