As a side note, use the rent differential as a lesson that sellers are always honest and verify the rent that is being paid via seller rental acct bank statements or talk to the tenant (if permitted).

So, that's materials, project management cost, caring cost, permits, taxes, insurance, architecture, utility hookups, inspections, delays etc.

@Kyle W. sounds like a very interesting prospect.

First American Exchange recommends that taxpayers build in a “cushion” by identifying properties that are worth less than what is permitted, in case some properties are later determined to have a higher value than what was originally estimated.4. 95% Rule.

But the previous owner had made some additions to the house and an extra bedroom and bathroom were added apparently without obtaining a permit.

And they are only permitted in certain neighborhoods.  

However, we don't make guarantees about performance because we don't want prospective investors focusing on the guarantee.  

Here is mine:CONTRACT TO HOLD Property Address: __________________________________________________ City: ______________________, State _________Zip_____________This agreement is between_________________________________________, hereafter referred to as “Prospective Tenant(s),” and ____________________________, hereafter referred to as “Landlord.”Landlord acknowledges receipt of payment in the amount of $___________ from Prospective Tenant(s) as a non-refundable binder for the property listed above.

But it has to be permitted and that means a state licensed plumber.

Only about 25% of the Parks I've prospected in are strictly owner occupant.