First Buy and Hold Deal?

[Chuck Hollowell]

I am working on my first buy and hold purchase.  Seller is in pre-foreclosure and has a short sale firm helping him sell the property.  

Home was built in 2009.  I had a home inspection yesterday and there's basically nothing wrong with it.  Just a couple minor repairs.  It's in a subdivision with new homes being built across the street priced in the $140's and $150's (with more square footage).  

Home is 1585 SF, 3 bed, 2.5 bath, 2 car garage.

Here are the numbers:

Market value with minor cosmetic repair (paint, carpet) = $135,000

Short sale price = $110,000

Market rent = $1,150/mth

Property taxes = $1,400/yr

Insurance = $700/yr

Maintenance/Repair/Capex = $1,500/yr (I'm thinking this is pretty conservative given the condition of the house, but let me know if you guys think otherwise.)

HOA = $480/yr

Vacancy = 10% (This one makes me a little nervous because there are a good number of other SFHs that are rentals in this area. American Homes 4 Rent has been very active in this area. I ran the numbers on rentals on MLS in the immediate area and the average days on market for similar properties was 56.)

Mortgage = $459 (conventional financing with 20% down)

I would do property management myself.

With these numbers, cash flow is >$200/month.

What do you guys think?  It is nowhere near the 2% rule, but nothing in my market (Raleigh, NC) will come close to that (at least not in any areas that I'd be interested in).

My other thought is that I would be getting it at enough of a discount that I could possibly do a "paint and carpet" flip.  I'd rather buy and hold if the numbers make sense, but the vacancy factor seems like a bit of a wild card, so I'd like to have another exit strategy.

Thanks in advance!