I would much rather learn from the mistakes of others than my own mistakes (it's certainly less expensive), but sometimes failing and adjusting is needed to grow.

High risk loans = commercial, portfolio, blanket, seller--financed, adjustable, callable or with a balloon.Higher rate = 6.125% and up.Paying a loan down 20% doesn't really help ya other than shortening the term. 

Tyler - assuming the plan is to move into one of the units  -  fyi for conventional loans  - down payment mimimum for  2 plex is 15% and down payment for  3 plex is  25%  ........if  prices are  higher than 340K  - you might  consider getting  your loan pre approval  adjusted for  higher  amount   in case you locate a  property thats a bit higher ....the tacoma area  seems to have  positive momentum  right now so I think its unlikely  to  find any multifamily  properties in this price  range anywhere close to Tacoma

I really appreciate you time and help.Purchase price in May 2007 = $535,000Estimated sale price = $620,000 (based on conversation with trusted real estate agent)Net Adjusted Basis = $301,546 (taking depreciation into account which is ($535000/27.5) * 12 years = $233,455)Costs of Sale (commissions, fees, etc.) = $62,000 (assuming 6% for real estate agent commissions and 4% for other closing costs)Gross Capital Gain = $256,454Remaining Mortgage Balance = $330,000Recaptured Depreciation (at 25% of total depreciation) = $58,363.5Accumulated Passive Losses to date = $157,000Net Capital Gains (Gross Cap Gains - Losses) = $99,454Federal Capital Gains Taxes = $58,363.5 (All from depreciation recapture. $233,455 of Gross Cap Gains account for depreciation and remaining $23,000 of Gross Cap Gains offset by Passive Losses)Reduction in overall Federal Taxes paid due to remaining Passive losses (assume I pay 25% Federal Taxes on my overall income per year) = $33,500 (there is still $134,000 passive activity loss left after offsetting the $23,000 Gross Cap Gains)California State Taxes (at 12.3% of Net Cap Gains) = $12,233Gross equity = $228,000 (Sale price - Cost of Sale - remaining mortgage balance) Net Take Home Cash = $228,000 (Gross Equity) - $58,363.5 (Federal Cap Gains Taxes/depreciation recapture) - $12,233 (California Taxes) + $33,500 (Fed tax reduction from remaining passive activity loss to offset ordinary income) = $190,903.Does the above seem reasonable to you? 

I started with a high expectations on the cash flow but after spending a good amount of time trying to find a deal I realized it’s not that easy so I adjusted my criteria to find a rental property with a low cashflow(around $100) after expenses.

So basically, "back of napkin" to see if it loosely works...making an offer, if offer is accepted, during the due diligence, find out the age of everything...re-run the exact numbers and then make adjustments accordingly.  

I'm an insurance adjuster for a major insurer and I've done a couple of crime scene clean ups and 20k seems really high!

You may get a better picture of your market by running your version of collected information and the published reports of past activity to strengthen your ability to spot trends and to compare your ongoing results with reality so you can adjust your formula.

Examples of these are changing washers for faucets, or adjustments to the toilet, back before fluid masters, they had to occasionally adjust the "ball" in the tank.

Adjusted the LTC and ARV numbers as needed.