I think I made a mistake...should I back out and lose $1700?

[Emily Allred]

We are newbies.  Like typical newbies, we're stupid.  We're about 3 months and 1.5 properties into this biz, and realizing just how inexperienced we are.  I just stumbled across biggerpockets (which is amazing!!!), and am realizing that we are locked in to buy a house that, by no definition, is a "good deal."  I mean, it's a fine deal.  If i were buying it to live in, I'd be totally pleased.  But for rental income, I now realize it's not that great of a deal.  We're set to pay $132,000 for a house that's going to rent at $975, and appraised at $135,000 (original asking price was $160,000...which is part of why we THOUGHT it was a good deal)      

In a crazy turn of events, our LLC partners just backed out of our newly-formed LLC last night. Techinically, we can still afford to buy this property. But not without much belt-cinching. So my question is this--should we back out while we can? We'd lose the $1000 earnest money, plus the $700 we've paid for appraisal and inspection. The realtor says that's all we'd lose.

Our lawyer says it's up to us.  Now that I realize that this house isn't an amazing deal, I'm thinking we should back out, and wait for something better.  But losing $1700 sounds painful. And interest rates are going up, we're locked at 4.25%, which some peeps predict is the lowest it'll be for a long while.  What should we do?!?!?!

Any thoughts/suggestions/advice would be greatly appreciated!