Does this seem to good to be true?

[Carlos Garza]

Hello BP. I have been interested in REI for a while now and believe I am finally ready to take the plunge. I have been prying here and finally am making my own post. I will add a picture and more info to my account shortly. I just haven't had time yet, being consumed with work.

I have found a town home for 63K. The highest I will pay is 60K, but plan on offering 50K. Have seen the home and there is no obvious damage. Plan on having a contractor/inspector look as well, but there is no forecast damage. Constructed in 1997. Avg rent in the subdivision is $650-$850.

Running my numbers at worst offer paying 60K looks like this. Lender wants 25% down. $15,000 down, $45,000 financed at 4.125% = $218 monthly mortgage. Estimated insurance and taxes is $200 monthly. Charging monthly rental of $650 - $418 monthly liability results in $232 cash flow.

The numbers how I understand them are:

Cap Rate: $7,800 / $60,000 = 13%
Cash on Cash return: $5,400 / $15,000 = 36%

If I run everything at $850, it's even more realistic seeming.

Cap Rate: $10,200 / $60,000 = 17%
Cash on Cash return: $7,800 / $15,000 = 52%

Am I looking at everything correctly or did I make a mistake somewhere?

Carlos