First buy and hold deal-appreciate your insight!! East Dallas

[Amber Terry]

After creating an LLC and joining Bigger Pockets 5 years ago to start RE investing, I finally did something this year!!

Currently holding a wholesale/flip property in my Class B neighborhood near Casa Linda, partnered with a great designer/project manager, about 50% complete. Most of my cash (500K) is tied up here until Nov. 

Another opportunity came up from a neighbor that is selling a rental SFH in the Casa View neighborhood nearby, Class C. Off market deal, no realtors.

Opportunity house is in 75218, 2/1, 1950 build, 1014 Sq Ft, price of $200K / $197 sq ft

https://www.biggerpockets.com/...

Condition is fair, hardwoods need refinishing thorough, kitchen and bath ceramic tile is OK, needs full clean and paint (some pet damage from large dog but no urine). Exterior is siding. No carport or garage. Kitchen cabinets are OK, maybe could be refinished, counters are older chipped laminate. Fans and lights are 80's style. New fence from last 2 years. 2015 roof.  Updated central HVAC, current style ducts, not sure of age of HVAC or gas water heater. Evidence of current or past rat infestation in attic.  Have not done inspection, seller is OK with offer contingent offer / inspection findings. 

I'm assuming about $10-15K for paint/hardwoods/counter/lighting and misc repairs and an ARV of $240-260K. Inventory is still very limited over here, hot market.

Tenants have been in place for more than 10 years, disabled. Consistent payers at $1250 (no increase for past 2 years), way under market ($1500-$1600 rents based on comp research and BP calculator) although home would need to be freshened up to get that.  They are month to month at the moment. 

Tenants will not be able to afford the $1600 a month so my plan is to offer 90 days cash for keys to get them out early but give them time to plan, or just give them notice of non-renewal 6 months out. I realize this is a business transaction, but also I'm trying to be a decent human being. I know ya'll can give me hell on this. The timing is a little stretched out to 1) give them plenty of time to find something else and 2) buy me some time while I'm still heavily involved in learning the flip business on my other project. 

I can either come up with the funds then refi (spent hours reading Andrew Postell's method, but that's a whole other thread) or I can just do a traditional mortgage from the start, depending on what I negotiate with the seller, who is not in a huge hurry. 

Bigger picture?  My original intent with RE Investing was a buy/hold strategy for a triplex or quadplex situation.  

This opportunity is nice because it is close, low investment amount so I can learn the business before I jump into something bigger. The cash flow sucks, I have a good paying job so I can float that, the 5 year ROI at 16% is looking pretty enticing.

Should I go for it or should I finish my other project and free up some cash so I can get into the plan for the tri or quadplex in a few months, ideally the market softens up a bit and becomes a buyer's market by then??

Other question---for this market how do y'all feel about the 3% on vacancy? Then I have 5% on R&M and 5% on CapEx. No idea if these numbers will hold.

THANK YOU FOR ANY HELP OR ADVICE OFFERED!   Also---looking for a DFW based RE Mentor or Consultant familiar with these investment types!