Duplex in nicer area - deal too thin?

[Emily Weitkamp]

My husband are looking to buy a multifamily in an B class area for buy and hold. We know that the cash flow won't be as great for a "nicer" area, but we'd like to manage ourselves and start with a tenant pool that is less likely to be problematic. We have cash for a reasonable down payment but we are considering "house hacking" -- renting out our current single family and moving into one side of a duplex for a year -- to get an FHA loan and use up less cash.

There is a duplex we are considering is in middle class area outside the city in a great school district. Average household income in the area is about 70k-80k. The house is not that old by local standards (60's) and in good condition with some recent updates.

Offer: $240,000

Each side: 3 bed/2 bath, 1 car garage per side, all separate utilities

Rent: $28,800 ($1200/side/mo)

Vacancy: $2880 (assume 10%)

P&I: $1031 (assuming 20% down, 5% interest. would be ~$200 more with FHA loan I think)

Property mgmt: $3111 (assume 12% - we plan to do ourselves, at least at first)

Taxes: $5400

Maintenance & Repairs: $1000 (tenants do lawn care/snow removal themselves)

Capex: $2592 (assume 10% per year of rents)

Insurance: $1200

Total rents - vacancy: $25,920

Total expenses: $13,302

Debt service: $12368

Yearly cash flow: $250 (ugh!)

My questions:

1. What do you think of my input numbers? Too conservative? Not conservative enough? Am I forgetting something? The numbers line up pretty well with the 50% rule so I guess I'm not too far off...

2. I'm having trouble gauging whether improvements to the home could warrant higher rent and increase the cash flow. Rentometer says $1200/mo is reasonable for the area. The units currently look just ok - a bit drab and outdated. New flooring, paint, and maybe some updated appliances in the kitchen could go a long way toward making them much more appealing. However, I'm not sure I'd get a good enough return to warrant the updates. How do you know what upgrades are worth it? 

3. Is this deal too thin? That is my gut but I'm having trouble just letting it go. Should I just expect a thin deal in nicer neighborhoods where small multi-families are uncommon?