Buy or pass? Duplex in KC

[Nic S.]

I'm under contract on a Duplex in a B+ neighborhood in suburbs of KC. This is a buy and hold property. My RE criteria is $200/door + 12% CoC. During the inspection we found significant CapEx items that need to be replaced(Roof,Retaining Wall, Sewer Stack, HVAC, Oven) totaling $29K and I'm being offered three options.

1. Option (1) 
2. Purchase price: $148k
3. Gross rent: $1700
4. ARV: $175k
5. 25% reserves for Vacancy, Maintenance, CapEx, PM + PITI
6. Cash flow: $417/mo 11.94% CoC
7. Seller will replace roof, retaining wall, Sewer stack, and Oven but NOT HVAC - 1st estimate came in at $13K. 

1. Option (2)
2. Purchase price: $161k
3. Gross rent: $1700
4. ARV: $175k
5. 25% reserves for Vacancy, Maintenance, CapEx, PM + PITI
6. Cash flow: $366/mo 9.76% CoC
7. Seller will replace roof, retaining wall, sewer, oven AND HVAC

1. Option (3)
2. Cancel the deal

Option 2 gives me less short term CF but all major CapEx items replaced. I'm currently withholding 8% for CapEx, am I wrong to withhold 5% if all items are brand new? Rents are locked in at $1700 for next 18 months. Anything I am not thinking of? Thanks in advance for your advice and questions....

[Stephanie Singer]

I would be interested to know what the cost of the duplex would be with the seller making no fixes and you buying it as is? I work in the Kansas City Metro area with investors acquiring properties for them and one thing I have noticed is that the seller is always charging more than what these fixes actually cost. Usually, buying a distressed property is great especially when you have a trusted boots on the ground team to help get it rehabbed ultimately getting you increased equity by saving you with rehab costs and making sure they are done correctly and with no shortcuts.