Advice on Purchasing from a Family Member & Deal Analysis

[Nathan Patterson]

Hello BP,  

So recently a family member has posted their house up for sale in Mississippi, I live in Colorado.  This is a home that I have been around for years so I know it has been taken care of, lived in the area for 14 years.  It does need some rehab, but not much to get it rent ready.  I'm budgeting $10,000 for rehab, over estimating.  It is in the Northern part of Mississippi, smallish town of 40,000, though it is growing....just slowly.  Rent rates in the area are 800-1000.  I have two questions, but first the numbers.

As Is:

purchase price: $110,000 

rent: 825

10% for vacancy/PM/repairs/Capital expense: $82.50/ea

20%downpmt - $22,000

this leaves a Cashflow of $6.40/month or $716.51/yr.  

P&I: 450.60/month 

PITI:488.60/month

COC: 2.095%

cap rate: 5.567%

Total ROI: 12.61%

This is based on a 30 yr mortgage, 20%downpmt, interest rate of 4.59%.  

$90,000 purchase. 

rent and expenses stay the same

downpmt goes to $18,000, still the same 30 yr mortgage & 4.59% interest

Cash Flow: $88.33/month $1,601.32/yr

COC: 5.374%

Cap Rate: 6.695

Total ROI: 15.25%

P&I: 368.67

PITI: 406.67

Additional info, currently the house is a 2bed 1 & 1/2 bath. One of the bedrooms used to be two, one of the walls knocked to make it into one large room. If that was split to being two again, making it now a 3 bed, rent would increase to 950-1000. That would change the COC/Cap Rate/total to 8.44%, 7.71% & 18.32% respectively. This is still for the $90K purchase.

For the $110K, would come out to 4.77%, 6.39% & 15.29% respectively.  

Of course this means a higher rehab cost which I have not accounted for as of yet.  

Do these numbers sound right or am I missing anything? 

Second  question:

If I do end up purchasing this house, what would be the best way to purchase?   I haven't purchased a home before, let alone one that is 18 hrs away.  I know my team will need to be based in Mississippi, which the majority of my family lives around the area so they can help with PM and other issues & I routinely visit 2-3 times a year.

Basically, what am I missing?  What is the best way to purchase the house if it is a good purchase.  Are there any pitfalls I should watch out for with it being long distance.