Running the Math on an initial deal

[Kelly McCullen]

Here goes it, folks.....
2 bed/1.5 bath - 1300 sq feet.

List Price: $40,000
Last renter paid: $400/month ( I know, it's the 1% rule in this case)

The $400 per month rate was based on a house that needed some "sprucing" up - I wanna lay eyes on the level of "sprucing up" needed, however. I think up to $500 is possible.

I wouldn't pay full price, realizing that it likely needs a new central AC unit, will need new carpet, and maybe some large kitchen appliances. Do those upgrades count against the "2% rule" initial analysis as a cost of acquiring the property - or is it counted as part of the 50% of the NOI eaten by monthly expenses (only taken as a hit when the rental is purchased)?

In using the 2% rule, I'm assuming I'm carrying a 100% LTV mortgage, but I'd, in reality, be paying 10% down. Do you NOT count the down payment in the 2% rule? That makes it easier, but it's my money.....

The house needs some TLC, but I don't think it's outrageous. The home was last rented, in current condition, about three months ago, so it'll rent almost 'as is.'

Asking guidance of "masters" - is there any possibility here?

KMc