The cash on cash return is only meaningful when you evaluate it based on your long term plans.

It depends how long you plan on living.

The planning process can take a very long time!

l plan to use that money to start investing in real estate.

For example, if you're planning a kitchen remodel, get multiple quotes to ensure you have a solid grasp of what it will actually cost.3.

I plan to call lender on this but don't want to wave any red flags. thoughts?

I have one property at the moment, but plan to expand my portfolio. 

The 1% rule is best only used as a quick and dirty evaluation used to pick which property you plan on running additonal calculations on.

For example the property being historical or a critical part of a large development plan.

So - somewhere 2 hours away, or somewhere you like to vacation in, or where all your family lives, or where you plan to move someday.Too many people are trying to do exactly what you're doing - pick a market based on a formula - and they end up buying a random 'cheap' property thousands of miles away, turn it over to people they've never met or even spoken to, and then... lose money.