. - Taxes are on the higher side at $6,000 yearMy Numbers: $115,000 putting 20% of my money $23,000 and finance the rest with total expense of $1,834Monthly expense numbers: Future Maintenance 13% $273 - Vacancy 5% $105 - Property Insurance 5% $105 - Property Taxes 23% $500 - Property management 10% $215 - Office/Travel/Legal 4% $84 - Mortgage 26% $552 - Monthly Cash Flow - $316 per month or $3,792 per year so Cash on Cash = 17%I think this looks like it is a deal worth doing and I also believe I can bump the total rent up by $50 each tenant which I think make it even better.

Its extremely important to know your numbers upfront from approved sale price, Maximum or Minimum downpayments, programs, costs, and seller credits.

But once I got the bills, I increased the rent with the tenant's approval and signed an addendum to the lease stating the rent increase would be X and the owner would take over utilities.

The last thing tenants want to do is lose their section 8 support, it takes years to be approved for it.

That is, they take the arrears, the late fees and any legal fees and they create a 2nd.

Alternative is the sherif evicts him and I pay tax and insurance.I know we can have a gentleman's agreement on these things, but im still afraid he might be able to legally sue me if we have a legitimate residential lease?

The AP has to be open, notorious and hostile...those terms have a legal meaning and essentially it is that you as the owner have been fully deprived of your right to the property.Absent those items above, it sounds like at best they have another legal right which is a "prescriptive easement".

Hello Doug, I am not a real estate attorney nor is this legal advice.Unless someone's state has specific laws banning contract assignments you should be fine doing the following.  

A good property manager will help to keep you out of legal trouble and also be a much-needed buffer for your new neighbors, who could turn out to be psychos. 

It separates your personal assets from your business, providing a safeguard if any legal issues arise related to tenants or the property.