Deal - Need Advice

[Joe Conklin]

I'm in the process of negotiating a deal and come here for advice.  I'm having trouble getting my thoughts together as I have opposing point of views.

Location: "B-" area / development in a "A" town with "A" schools.  The development that I am looking in is the least affluent area in the town.  However the rental I'm looking at is in the good section of the bad area.  It is known to be a lesser section of the town and has occasional drug bust etc and I'm not so sure which way the development is trending.

Property: 

3 bedroom , 1.5 bathroom townhouse

List Price: 115k

ARV: 120k

Rehab Costs: 20k (bathroom remodel, carpet, painting)

Rent: $1350 (this is a fairly conservative number)

I currently have an offer in at 90k that was countered to 110k and I am trying to find my best offer on this deal.

Cash flow:

Numbers considering 100k purchase price and seller paying all closing costs.  Also, 30 year fixed rate at 5.25%.  I have private money lending at 6% that will fund the rehab and I want to ensure that I am calculating this correctly.

Rent - Mortgage - Insurance - Tax - Vacancy(10%) - Maintenance(10%)

1350 - 440 - 50 - 210 - 135 - 135 = + 380

Cash on Cash return (initial):

380x12 = 4,560 / 40,000 (down-payment + rehab) = 11.4%

Cash on Cash return (after rehab and appraised at 120k) 

New Cash Flow using refinancing with 80/20 conventional:

1350 - 530 - 50 - 210 - 135 - 135 = +290

290x12 = 3480 (per year)

Total Cash invested:

Down Payment + Interest to Private Lender + Cost to refinance (4% of remaining principal)   24,000+1,200+ 3850 = 29,050

New Cash on Cash: 3480 / 29050 = 11.9%

Major concerns are not knowing which way the area is trending and not getting any sort of discount on the rehab.

Any input would be greatly appreciated.