Evaluating Rentals that don't appreciate

[Matthew McKinley]

3 months ago I purchased my first rental house for $50,000. It was move in ready, I put up a sign, showed it 16 times in 2 weeks and had a renter in 4 weeks for $875/month and $2,000 down. I have the opportunity to buy the house next door, similar size/rent, for $40,000 and it will need a little work but not too much. The tricky thing about these houses is they are in a FEMA flood area so: 1) They aren't going to appreciate as fast as other properties since flood insurance makes them tough to sell and 2) I am paying cash and not keeping a mortgage to avoid paying the flood insurance. I'm just wanting some insight as to how to look at the numbers to evaluate the deal.

Recap:

$100,000 cash investment

$1,750 monthly gross income

Thanks for any insight