It's not a 2%er, but does it work otherwise?

[Bob Oliver]

Here is what I have. 1200SF, 3BR, 1BA brick ranch on 1.3Ac in the Williamsburg, VA area. it sold in 04 for $105k and was a rental then for $1250/mo. Owner took off the market, gutted, new wire, copper, insul, flooring and rock and moved in for 3-4 yrs. for sale now at asking of $250k. Property also has 2 out-units cottages needing rehab that have kitchen and baths. i estimate $10k to rehab, $5k each, to make occupy-able.
By the numbers:
Rents: $2300: House $1400, Cottages: $450 ea
vacancy at near 0.0% because it is another student house that leases 6 months before start.
loan: 25% dwn conventional, 6%
3% closing
$10k improvements
I come up with about a $160,600 1st D/T
Taxes are $0.77/100
insurance about $300/yr.
I can see offering a max of $195k.
By the 50% rule I get about $185 positive monthly.
does anyone else see this as a potential deal? Obviously, by the 2% rule it is a walk-away, but isn't that better suited to $1000 GOI or less?
My analysis software has this deal at about a 15% C/C. Are there other finance suggestions?

[Jon Holdman]

Here's how I see it:

Price $25000
Down: $62,500
Loan: $187,500
Payment: $1124.16

Rents: $2300
Expenses, vacancy, capital: $1150 (50% rule)
NOI: $1150
Cash flow: $25.84
Cash flow: $310.11 per year
Cash on cash return: 0.5%

I'm ignoring the fixup expenses because that just makes a terrible deal even worse.

If you could buy this $140K, you could hit the $300/month in real cash flow ($100/unit/month, a tenant in those cottages is just as much work as one in the house) from your property with another $220 a month from the down pament for a total cash flow around $520/month or $6250/year for a 18% cash on cash.