Obsessed w These New Duplexes - PLEASE, HELP ME ANALYZE!

[Mark S.]

Sorry for such a long post, but I'm semi-obsessed with this potential deal. I've been wanting to buy one of these brand new, all-brick duplexes for some time now. I tried to further break it down. All advice and guidance is greatly appreciated. Thanks in advance, everyone!

2 bedroom / 2 bathroom, 1,320 sq ft each (2,640 total), new, all-brick, side-by-side duplexes.

THE NUMBERS - TWO SCENARIOS
SCENARIO 1 - Pay Asking Price, Collect Lowest Rent Likely
Purchase Price: $190,000
Down payment @ 20%: $38,000 down
Loan Amount: $152,000, 30 years at 6.00% (estimating here)
PI: $911.32/month
Gross Monthly Rent: $1,600/month (conservative estimate)
Yes, I realize according to the 50% rule, I'm already cashflow negative.

Expenses
Taxes: $2,119/year = $176.58/month
Insurance: $700/year = $58.33/month
Vacancy: 8.74% (according to www.bestplaces.net, as of June, 2012) = $139.84/month - I think this is a bit high, as these units seem to have very little trouble getting occupied.
Groundskeeping: $500 = $41.66/month
Advertising (Craigslist, Internet, For Rent signs): $100 = $8.33/month
Maintenance/Miscellaneous: $1,000 = $83.33/month

Total Annual Expenses (including vacancy): $6,097.48 = $508.09/month
Net Operating Income: $13,102.52/year = $1,091.87/month
Less Annual Debt Service: -$10,936/year = -$911.32/month
Cashflow Before Taxes: $2,166.52/year = $180.55/month
Yes, below the ideal $100-$200/month per door.
Cap Rate: 6.90%
Cash-on-Cash Return: 5.70%
Taxable Net Income (after adding back $1,816 principal payments and amortizing over 27.5 years for $6,909): -$2,926. So, cash flow is not taxable.

SCENARIO 2 - Pay Slightly Below Ask, Collect More Likely Rent Purchase Price: $185,000 (instead of $190,000).
Down payment @ 20%: $37,000
Loan Amount: $148,000, 30 years at 6.00% (estimating here)
PI: $887.33/month
Gross Monthly Rent: $1,700/month (more realistic estimate)
According to the 50% rule, I'm still slightly in the red here.

Expenses
Taxes: $2,119/year = $176.58/month
Insurance: $700/year = $58.33/month
Vacancy: 8.74% (according to www.bestplaces.net, as of June, 2012) = $148.58/month - I think this is a bit high, as these units seem to have very little trouble getting occupied.
Groundskeeping: $500 = $41.66/month
Advertising (Craigslist, Internet, For Rent signs): $100 = $8.33/month
Maintenance/Miscellaneous: $1,000 = $83.33/month

Total Annual Expenses (including vacancy loss): $6,202.00 = $516.83/month
Net Operating Income: $14,199/year = $1,183.25/month
Less Annual Debt Service: $10,647.96/year = $887.33/month
Cashflow Before Taxes: $3,551.04/year = $295.91month
Cap Rate: 7.67%
Cash-On-Cash Return: 9.60%
Taxable net Income (after adding back $1,768 principal payments and amortizing over 27.5 years at $6,727) = -$1,409. So, cashflow is not taxable.

These numbers are probably far less than impressive, but remember that the property is brand new, my estimates are very conservative, and I'm essentially buying at retail price. I'm willing to sacrifice a little return in exchange for a (at least in the beginning) "lower-maintenance" property. I figure this is a good way to get my feet wet while I gain experience.