Getting Discouraged by the Numbers

[Joanna Gossett]

We're getting closer to pulling the trigger on our first buy/hold deal and as I run the numbers with multiple financing scenarios, they just don't look right. Once I factor in the costs of financing/investment basis everything is showing as a negative cash flow or a very low cash on cash return (under 2%). 

We are looking at a property that will be sold at an auction in a few weeks. Bidding will start at $55K. Recently appraised for $103K. 3 BR/2 BA, 1500 SF. With no rehab, should rent for $1200/month (conservative estimate) with a 7% vacancy. Taxes $2200/year. HOA $300/year. Insurance $2000/year (complete guess).

Looking at multiple types of conventional financing, 5/1 ARM, 7/1 ARM, 15 year fixed- all 20% down based on purchase price of $75k or $100K and after closing costs, etc. none of it makes sense. We aren't necessarily looking for huge cash flow initially- we want to have a positive return and get the loan paid off quickly, looking at a long term investment/rental.

What am I missing? Or is there just no way that this is going to be a good deal?