Even if your rate was 8% (it wouldn't be) you could still invest those additional funds into the market and average out a better return. 

You will never get that back in terms of additional cash flow

The big issue is building a single small residential unit is the most expensive residential development.Here is a list of why adding a single ADU in single family zoned areas in my CA market is typically a poor RE investment:1) The value added by the ADU addition is often significantly less than the cost of adding the ADU.

Its not the best for beginners but you can learn a lot.In addition to the due diligence risk, you need to pay for the property on the spot, upfront cash or cashiers check. 

Additionally, their marketing was very compelling.

Additionally, if you are not a realtor, how have you gained access to the MLS before?

DM me if you would like to discuss anything additional about this.

Avoid C-Corps, as they incur double taxation.Use LLCs for rentals and consider an S-Corp election for flips if income justifies the additional complexity.This post does not create a CPA-Client relationship.

Quote from @Jaycee Greene: A few things I noticed, in addition to having the tenant pay the utilities are:1) Incorporate annual increases in rent higher than 2% (in your area, maybe 4%-5%) with a slightly smaller increase in operating expenses (say 2%-3%)2) With a gut rehab, I'm not sure why you need to spend $128/month on cap ex, at least for the first year or 2.3a) An 80% cash out refi is probably going to be hard to get.

The property is listed as 1001 but the additional unit is listed as 1002.