In the last few weeks a towel has replaced the front curtains, and we've now asked the tenant has been twice to get rid of the trashy-looking towel and hang curtains or blinds (he says he has blinds, hasn't had time to hang them).

You won't have that much expense every year but you will eventually need to replace major things and that will really hit your cash flow for that year, bringing down the average.

@William Ellis , I think you are looking at this correctly.I think it is very smart to still budget for management because if you are going to be doing the management, you should be paid for that separately from how you are paid as the investor.If you are planning to hold for just a few years, you are probably correct your take home cashflow will be higher, but if you're planning to hold for the long term, that extra cash flow should probably be going into a future capex fund so you don't get blindsided when all those things need to be replaced at the same time.

While Kodak & Xerox have probably lost their glory, it's been replaced in Rochester by the University of Rochester/Strong Memorial Hospital (largest employer I believe) as an academic and research institute (as well as trickle down bio-tech), Paychex, Windstream (which bought Paetec), and Wegmans (still a top company to work for) to name a few.  

For example: Start by reading xxx books, get into loan origination class, look to work for xxx type of company as part time, trial an error, etc.The goal is to every year increase by 40%+ the working capital while also creating a cash flow to replace current salary to then work full time in RE Investing.

Replacing an air conditioner could cost you 3 years of cash flow to recover.

Assuming you need new roof, repair all termite damage and re-drywall, replace all tile due to cracking, probably remodel bath for a few $k, landscape and paint outside you are probably in the $18-25k range using contractors.  

Let's see how much Mr seller enjoys the city making him tear it all out and replace properly! 

You could also offer to replace the note on this property with a not on a new property.  

The ONLY way the problem can be fixed is by replacing the line.The seller claims 'problem has been fixed', so he should be able to provide proof of this.