FIrst Deal: Include Closing Costs w/price of duplex

[Brandon G.]

I'll try to be as succinct as possible.  I have a question on a couple of options on how to structure our first deal.

We're buying our first property, a duplex, from a friend.  My friend must walk away, after everything, with 67K.  We have almost exactly 15K for the down payment (plus some saved for an emergency fund that we're not touching).  We aren't using an agent.  My friend said he would be willing to let us add the closing costs into the total of the loan to lower our cash out of pocket if we wanted to do that (essentially, he would pay closing costs and we would add that amount to the total loan amount).  Our goal is cash flow and all cash flow will be reinvested back into purchasing more rental property.  Our main goal is to save as much money as possible and leverage as wisely as possible to acquire enough properties, as soon as possible, to supplement my wife's income with cash flow so that she can stay at home with the kids.                                                                                                               (If it's relevant, we determine cash flow as: Total Rent - 50% - mortgage = cashflow)

Here are some of the different scenarios I have worked out.  Assuming closing costs are 3% I figured the first scenario where we pay 67,000 and also pay the closing costs out of pocket.  In the other scenarios I first added 2K, then 4K, into the principal of the loan to account for closing costs and assumed a 20% down payment in each case.  It seems if all costs associated with closing this deal were 4K, then we would save $1,200 up front, but our cash flow would decrease by approximately $20 a month.  

Please let me know if I have done this incorrectly or if I have left anything out.  

                                                                                       Cash out

Price         Down Payment        Loan Amount               of Pocket            Monthly Payment

67,000           13,400                     53,600                       15,400                     324.81

69,000           13,800                     55,200                       13,800                     334.50

71,000           14,200                     56,800                       14,200                      344.20

What all costs are associated with "closing costs?"  Does this include title insurance?  Are there any other expenses I should be aware of that I may be leaving out?  

Thanks,