Finger on the trigger (need more opinions)

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Good morning,

To preface this deal, I'm currently in the market to purchase my first primary residence so I qualify for the $8k or 10% (respectively) on the purchase. I've been doing a lot of searching trying to find a property that I can live with for 3 years (amount of time I need to stay there without needing to payback) but that also acts as an investment for (a rental that will cash flow). The area that I'm looking in has a State University but in general a somewhat depressed economy to go with it. Because of the University the city will never really go away (fortunately).

I've found a single family home that has been split into two units (upper/lower). 2 bd 1 bth in each unit in a very desirable part of town and still close enough to the University to be considered off-campus housing (after I leave and want to rent it).

My intentions are to purchase and live in as a single family (for the sake of the credit) but keep the units separated. I would actually work on the two units over the 3 yrs to update them and increase value as a rental.

The home is LISTED at $110k and current taxes (non-homestead) are approximately $6k annually. By using as my primary residence I can use the FHA loan I qualify for with only 2.5% down at 5% fixed 30yr. The total PITI w/non-homestead tax is $1200 (and will be lower while I'm there with homestead exemption). Currently the property had been renting out for $1200 total ($600 per unit). This property is in good shape but rents are under market and I think could be bumped AT LEAST $100 per unit up to $200 per (realisticlly).

I know that I can't predict what will happen in 3yrs for the market but I'm trying to find out if the estimated $100-200 cash flow that I'll expect will make sense or not. Also, I very well might be able to contract this property for a bit less than the $110k.

Any and all thoughts would really help on this one.

-Josh :cool: