first time real estate investor, good deal?

[Jeannine Brennan]

We are new to Bigger Pockets, and after listening to a webcast and reading some on the forums, we were presented with an opportunity to purchase a home as a rental property (duplex with ADU (mother in law suite). We are not sure if this is the right move for our first deal, especially since the home is from 1900. The appraised value is $220,000, which is the current offer to purchase, but there were quite a few things that came up on the inspection. The current upper 2 bed 2 ba rents for $700 per month, the lower 1 bed 1 ba rents for $700, and the main space which the current owner lives in is estimating to rent $1000 per month, and with the two sections being very easy to rent.

We were looking to use a HELOC for the 25% down payment and closing costs @ 1.5% 1 year introductory rate with possible plans to refi into our primary mortgage pending rates, and then have a traditional 30 year on the rental at 2.625% (paying 3.5% points) for $165,000. Expenses estimate/month; Mortgage payment $665/m, $292 taxes, $122 insurance, $120 vacancy, $240 repair, $240 capital expenses, $240 property management (although plan to manage ourselves for likely the next 10 years) = $481/m cash flow.

The location is in a suburb, next to a school, a 2 minute drive to beaches/lake, and a few minute walk to a nature trail. The problems is the amount of work that may need to go into the property. On the inspection, there were electrical issues, garage roof is close to needing replacement, 5 years on the house roof, appliances are old, including one furnace and water heater, no water softener, windows are old, old chimney, garage doors need repair, baths/kitchens are outdated, but still functional, could use better sloping for the drive/yard, and this list isn't all inclusive.  We were planning on having an electrician out to give an estimate, but maybe should be getting a general contractor.  Thoughts on proceeding?