Should I purchase my sister's rental property?

[David Latu]

Hi Everyone, my sister would like to sell her rental property for $300,000 to my wife and I.  The property currently has tenants who signed a two year contract for $1,600 in rent. 

Purchase price will be $300,000 and our down payment will be $75,000 (25%)

Our monthly Pmt will be $1,368 (Includes P&I, tax, insurance, vacancy (4%), CapEx (4%))

The monthly cash flow will $232 and ROI is 3.712%

I know that the ROI is horrible but the property value is $375,000.

Should we still purchase this property even though the ROI is 3.712% because of the $75,000 equity on the rental property?  (I will not sell the property if I purchase because I think it'll ruin our relation, but I'll feel comfortable selling it 5-7years down the road)

Any advise and thoughts will be appreciated.  

Thank you,

David

[Michael Veal]

@David Latu you should get the house appraise first don’t believe the numbers on Zillow or Redfin they are usually wrong. And I hope you are not getting your number from Zillow or Redfin either. If you are you might want to do more research.