Based on those two data points there is no deal.Understandably you are anxious to get in the game, and may have even jumped in without the resources of BP, but you cannot work the property and risk the loss of capital, for the reward of $20/month.  

Gross Potential Income $132,000 - Vacancy ($10,560) 8% - Concessions, Loss to Lease, Bad Debt $0 Effective Gross Income $121,440 Other Income (Laundry) $2,500 Total Net Income $123,940 EXPENSES Real Estate Taxes $12,500 Insurance $0 Contract Services $2,190 Trash Removal $0 Electric $0 Gas $0 Water and Sewer OR All Utilities $37,500 Legal $1,000 Management Fee 8.00% $9,915 Repairs and Maintenance  $7,500 General/Admin $1,100 Payroll $0 Other $500 Deposit to Replacement Reserve $3,000 Total Expenses $75,205 Net Operating Income (NOI) $48,735 Debt Service Principal $7,384 Interest $24,857 Total Debt Service $32,242 Total Distributions to Members $16,493 Member Contribution $234,163 ROE 7.044% Member Cash on Cash Return 7.04%

Here you go:PGI      Potential gross income   (say you get 1K per month--that is 12K PGI -VCL    Vacancy and collection losses+OI      Other income=EGI    Effective gross income-OE     Operating expenses+NOI   Net operating incomeMortgage payments are not operating expenses. 

Can you afford the monthly losses of an extended vacancy?  

I get that the ability to deduct passive losses phases out completely over 150k and that they carry forward.

If I buy this property at $75K, put 20% down with a conventional 30 yr, and achieve $1k/mo in rent (which is what comps for this type of property)... the following #s is what I see at a high level:- Principal & Interest: $293/mo-Tax : $150/mo-Insurance (est): $50/moTotal PITI: $493Est Expenses (50% Rule): $500-----------------------------------------Total Expense + PITI = $993/moIncome ($1k rent w/ 9% Vacancy Loss): $910/moCashflow in this scenario is negative.. with 1.3%  rent/price ratio.Even with a sales price of something like $55K (1.8% rent/price ratio), this doesn't cash flow.Now with the same above scenario, using est 30% expense assumption cashflows $180/mo.Am I being too conservative on expenses for a ~1,200 sq ft. brick bungalow ?

Or would I need to cut my losses and just replace them all?

If you are located in a stable market with no population loss predicted in the next decade (us census has very detailed and very educated forecasting models for most zip codes)then each month your tenant pays down your mortgage will count as money in your pocket.

You use your cost basis to calculate your capital gain (or loss) from the sale.On the other hand, carrying costs may be deductible but are subject to a 2% of AGI threshold.

I was also assuming that they would not be able to get the principal paydown as well.So if he paid 300k for the house and he pays the loan down to 250k, then when he sells for say 400k, he'll be able to keep:75k. (50k for principal paydown and 25k of the 100k that the house appreciated).I still say that the loss of appreciation is really a huge downside to this deal.