Sorry, I read this right before getting on the plane and I did the math while flying...it's been a long couple of weeks in the desert.And we're all making an assumption here that she paid on time, didn't take on additional mortgage debt against the house, etc.  

Am I doing something wrong or am I correct that it's pretty much impossible to cash flow off the following type 4 plex (this is pretty common in my area)8 rooms 4 bathsAvg. rents of $800 per month per unit Asking price $390k5% down conventional (or 3.5% FHA)6% interestAssuming 10% each for capex, vacancy, maintenance, and management (I will be managing myself but figure I should assume it into the analysis)Am I making bad assumptions?

So please grade my assumptions here.If I take over someone's payments, would I want to put it in a trust and then put the insurance policy in the name of the trust or is all this going too far to avoid the DOS?

The answer will largely depend on the specific deal but 25-30% down is a good assumption . 

@Neil Aggarwal - I'm glad you asked because your mistaken understanding would greatly influence your assumptions about the program.

If you just buy out her $50k, then your basis should be $100k.Let's say it appreciated to $120k and you had to pay her her half ($10k additional) to get out, then I'd say your basis is $110k, your original $50k, the $50k assumption of her debt (considered proceeds for tax), plus the $10k you paid her for appreciation.

So let's take an example property, and you let me know if I'm close on the assumptions.$1,000,000 purchase price @ 3.5% for 20 years = $5,799.60/mo$150,000 gross rents1st year P&I = $34,440 (interest), $35,156 (principal)1st year deductions$34,440 (mortgage interest)$25,641 (depreciation, $1M/39 years)$75,000 (expenses - I'm using the 50% rule here for the sake of simplicity; property management, property taxes, insurance, maintenance, repairs, etc.)$135,081 total deductionsSo my cash flow is going to be 150k (income) less 75k (expenses) less debt service ($69,595), or roughly $5.5k.

So based on the above assumptions, I believe your NOI should be $41,342.40 (or 60 percent of your effective rental income). 

Historical data and market indicators are without a doubt the best insight we have available to us when deciding upon which figures to use for our assumptions.   

Quite a few assumptions being made regarding my stance on this, most aren't accurate.