Please keep in mind that my comments are based on multifamily commercial property, not SF used as rental, but here goes.
I wouldn’t touch it as a long term hold, maybe as a fix and flip. Negative cashflow is poison. Here’s what makes me go through a deal:
Begin with gross rents.
Subtract all of your expenses EXCEPT interest. This includes but is not limited to:
Property Taxes / HOA if you have it
Insurance
Any utilities you pay (water? trash? gas? electric?)
Vacancy & tenant bullshit (bounced checks, etc) allowance (highly variable based on area and property quality vs rental rate. My vacancy rate is very close to 0%)
Property management fees
Maintance allowance (typically allocate 1% of purchase price here annually for a building in decent shape)
the result is your net. Divide your net by your cash in the property (with commercial buildings I’m typically in for 25% down, plus closing costs, plus some float), this gives you your cap rate. If you don’t get at least a 10% cap rate, walk away.
This nets you 20-30% annual ROE, most of which is the difference between your cap rate and your mortage interest rate.
