Opportunity to buy a house $50k under market value. Still worth it???

[Kurt Thomas]

Hey everyone,

I'm new to real-estate so sorry for the likely dumb questions. This would be my very first rental.

I have an opportunity to buy a house from an old neighbor for $425k. The zestimate shows $478k, however prices have been steadily declining, and I think $465k may be a conservative estimate.

It would rent for $2700/mon. The current owners do not have a mortgage, and would sell it to me direct.

Since the don't need the cash, I'm going to offer $50k down at a 3% interest at a 30yr rate, but buy them out and remortgage it with the bank at year 5.

No money needs to go into it, i have a $100/mon HOA, ~$800/mon escrow. After $265/mon from capex, repairs, & vacancy, i will lose $450/yr in cashflow.

I feel like this is a great opportunity, but it still won't cashflow. Are there any other suggestions on how to finance this thing to be worth it? Would it be worth it to deal with it not cash flowing for 5 years and then sell it?

What should I expect for closing costs? Is there rule-of-thumb?

Thanks for any and all advice!