Just trying to illustrate a rule that I stick to.

Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand.

What you're sharing illustrates the need for a proven, consistent, reliable system that ensures prospective applicants follow the same process and rules across the board, shields you from claims of housing discrimination, and keeps you sane by pre-screening unqualified window shoppers from the qualified, respectful, long term tenants you ultimately are seeking yourself. 

You said it as if the 1% rule were a “go” signal.I think this property is a good illustration that the “rules” are not “go signals”.Never forget that they are ‘back of the napkin’ checks to see if a property is worth more of your time.I think you’re making the right move passing on this as is, and I wonder, how would the deal have to change for it to become profitable for you?

I think something like Scott Smith illustrated in the post above is pretty close.

The appraiser has indicated to me that he not only plans on writing his report to illustrate a 2 BR, but also that he will reduce the square footage by 30% due to the non-permitted additions.

Im not trying to be mean, but with every post in this thread Greg illustrates a huge lack of knowledge of how the industry works.

If the house stayed empty (unlikely, just mentioned to illustrate a key tax concept), you would owe capital gain taxes on $400k minus $310k minus closing costs on both ends.

Let me illustrate below for clarity.Original Purchase Price - $73,000Adjusted Cost Basis after several years of depreciation - $55,000Sale price - $100,000Federal LevelAt the federal level this individual would be responsible for depreciation recapture from $55,000 up the purchase price of $73,000 at (25% federal level) and then Long Term Capital Gains tax from $73,000 up to the sales price of $100,000.State LevelBusiness Profits Tax from $55,000 up to the sales price of $100,000 @ 8.5%.Can anyone provide any clarity on this state specific tax situation?  

This is an illustration of how cheap vs. frugal works IMO.So, am I frugal?