My husband and I currently have 1 rental unit, a townhome which cashflows a bit over $500 a month in the Portland OR area, I have had this unit about 4 years now, so I got it for a great price at a good interest rate.I also have my own home, and both of these properties have a lot of equity in them, I have about $260K worth of equity altogether that I could get on an HELOC if I wanted to (this is the 80% LTV less current mortgages, actual equity is more). 

He was actually interested in doing a 2nd mortgage financing method.

This is actually my first time on this website, and I happened to stumble upon your post.

Rarely is that rate bump worth that LTV bump IMO. 60% LTV is actually the Fannie sweet spot, if stopping there will not get in the way of accomplishing your goals.

So my math in calculating the actual cash flow of the property can be very different than that of the seller. 

The beautiful thing about (most residential) real estate is that it is micro/micro and has more to do with people and personalities than actual structure or economic indicators.

Buy a trailer park at a 2 cap price, but syndicate a reality TV show about all the hilarious shenanigans and drama, and poof maybe now you're at a 20 cap.

A 3/2 or even 3/1 on the other hand should rent at $1250 - $1400 all day long.You can probably find comps to support the $120k price and if the home is nicely renovated it may actually sell for that much, but I believe most 2/1 homes selling at this price are the ones selling to owner occupants, such as parents buying a home for Jr to live in during college.

To me, that tells me it's a "guess" based on "fudge factors" which are based on "nothing" because of the lack of actual facts within the "fudge factors", and lack of any true analysis within the "rule".Third, if the rule has no real basis of facts, or analysis, and is not really a rule in the first place (or the 2nd place, in my order), then I'd say the 70% Rule is about 0% realistic...give or take 70%.

You are expecting 2189 a year at your calculations, however, its actually 2 units, so you are getting 1050/door/year which is pretty thin for the privilege of a mandatory job as property manager for 2 tenants, since you dont have enough budget to hire a real PM and scale your empire.