Walk away or stay help with this deal analysis

[Shema Turner]

Seeking some insight on a deal I was looking at.
Cost of home is $27000 2 bed 1 bath per side built in 1958 (foreclosure)

Info
Vacancy rate 12%
Its a B to C, class neighborhood (More C). Crime is low in that area.
average rent is 560-600
Price Per SqFt: $46
Monthly Mortgage 360
Renovation: 20000 ( estimated)
Loan: fha 203K stream line 30years 450 monthly mortgage.
Square Feet: 1,650
Monthly Property Tax: $95
Monthly Est. Insurance: $22

Using the 2% rule and have to account for renovation cost, its not a good deal, but I am aware that the 2% rule might not apply to my market.

Would you do this deal?

[Steven Hamilton II]

Dyna J.,

You are not looking at the fact that she only gave the rent for one side. She plans to live there. Thereby she may be on average out a bit per month, she will overall be better off than if she was renting as well.

Shema Turner,

What is the monthly mortgage? Is it 360 or 450? You listed mortgage twice there.

If monthly mortgage is 450:

One side rented
Monthly Rent: 1200
Gross Schedule Rent: 14,400
Discount for Rent: -7,200
50% Rule: -7,200
Total after Exp: 0
Annual Debt service: 5,400
Annual Cash Flow: -5,400
Monthly Cash Flow: -450

That is the same as renting yourself with below market rents. A great situation.

Both sides rented

Monthly Rent: 1200
Gross Schedule Rent: 14,400
50% Rule: -7,200
Total after Exp: 7,200
Annual Debt service: 5,400
Annual Cash Flow: 1,800
Monthly Cash Flow: 150

If Monthly mortgage is 360

One side rented
Monthly Rent: 1200
Gross Schedule Rent: 14,400
Discount for Rent: -7,200
50% Rule: -7,200
Total after Exp: 0
Annual Debt service: 4,320
Annual Cash Flow: -4,320
Monthly Cash Flow: -360

Even further discounted rent.

Both sides rented

Monthly Rent: 1200
Gross Schedule Rent: 14,400
50% Rule: -7,200
Total after Exp: 7,200
Annual Debt service: 4,320
Annual Cash Flow: 2,880
Monthly Cash Flow: 240

Now you're seeing a decent return. Just wait until you streamline that loan every few years or once you move out to get that payment lower.

-Steven