I would have never guessed that would be a factor.

@Kristina Lugo I prefer the cash out refinance in your situation because this allows you to delete the PMI forever which raises your cash flow substantially.

There are lots of other factors to consider other than the 1% rule. 

Cash flow for lower-tier props can look amazing on paper, but there are a lot of other factors that make real-world returns less impressive.

@Christopher Smith I agree the process is fairly straightforward but the risks of doing it yourself and having the IRS throw out your conclusion and taking on penalties and interest for under reporting income is something to factor into your cost decision.

Aside from property taxes, and analyzing rents in the area what other key factors should I be looking at to establish cap rates and potential profit?

Factors like taxes, expenses, and financing terms will also impact where the breakeven point is.

These issues can be financially devastating if not factored into the repair budget.

Are the conditions of a property a deciding factor even if the location is GREAT?

Given this I wanted to make sure that any property I look at with my realtor is going to be able to sustain as a rental property long term since I plan to hold it forever.