BTW, I am fine (no pun intended) with HUD and DOJ enforcing their rule(s).

Using 50% rule, it's a 23% cash on cash.

The problem with most real estate license education is you learn the rules, but you don't learn run your real estate career as a business.

How does HUD enforce the 50% occupancy rule?

@Kevin Seith Tear downs are more costly as mentioned by @John Moore there are usually additional costs for permits and engineering and you can't forget having to comply with all the current zoning rules like setbacks, off street parking, sprinkler systems, fire separation, density, lot coverage, and impervious surfaces.

@Sandy Paris As long as you learn how to apply the general rules and it makes the number easier for you to understand, then it can be a great idea!

I assume you can roll paint, so while you have these contractors lined up, as them what the cost would be, see what paint costs along with your materials and consider your time, doing this may save you some money on small things you might do yourself, but you can present the bids and the appraisal to base your offer on.You also need to explain that an appraisal is an estimate, not a true value and that you need to make a reasonable profit if you are in the business and justify your offer.Saying older lady doesn't mean much, if she is elderly I suggest you take some additional steps after you get a contract and that is to involve some center of influence, her kids, her attorney or someone who may advise her.

Using the 50% rule right now your expenses should be at least $8K to $8.5K based upon what your total rents should be.

Its hard for me to justify spending the money on a newer home with the 25%-35% down and the increased amount in taxes.

Using the 50% rule and a new >$800 PI payment you are ranging from several hundred negative cash flow to maybe $100/month if you happened to score one of these deals in a slightly higher end town.Obviously if you just did $50K of rehab you should cash flow much better than this the first several years as repairs and capital expenses should be low, but in the long run you need to account for them.