Unique opportunity. Is it worth it?

[Steven W.]

Background: I have the opportunity to buy out a mortgage on a piece of property for roughly half of what it's currently worth. I know the owner personally and have explained he is leaving money on the table by going through me as opposed to selling on the market, but he is still willing to move forward.

There is an additional "mother in law" addition on the unit (approx 300 sq ft with bath and kitchen), but it does need some TLC. I am not factoring in the potential rental income from the MIL unit in my numbers, but previous rentals have been at $300/mo.

I am also familiar with the property (lived in the MIL unit for a year) and don't know of any "gotchas". I will still get an inspection and contractor walkthrough of course. I am very interested in purchasing his property as a rental to start my foray into real estate investment.

My understanding is that he can gift me the equity in an agreement and the bank should take this existing equity as a "down payment" towards the 20%. My credit score is 820 if that is relevant at all. Because of this I am not factoring any major initial cost into my analysis.

Property value: $118,000 (Via Zillow)

Purchase price: $55,000

Principle & Interest: $298/mo

Tax: $89.40/mo (30%)

Insurance: $74.50/mo (25%)

Rental income: $950/mo (Est. $1100/mo via Zillow)

Repair/CapEx: $190/mo (20%)

Vacancy: $142/mo (15%)

Management: $95/mo (10%)

Landscaping: $47.50/mo (5%)

So by running the numbers I come out with a sweet $13/mo after all expenses (incl. mortgage). I am trying to err on the side of caution. Realistically I can charge a bit more rent (or rent out the MIL addition as well), and am trying to be conservative on my vacancy rate. 

Once things are "stable" I would be interested in redirecting the repair and vacancy buffers to paying down the mortgage earlier. On a personal finance side I can afford any capex issue that comes up without relying on banking the repair buffer. I could also pay the initial $55k to eliminate the mortgage entirely, but I'm trying to leverage debt to help build wealth through "passive" income.

Am I missing anything I should be factoring in? This deal seems kind of crummy despite getting the house for roughly half its market value. I feel like I am messing something up.