Short version: 2 bedroom SFH, 1,000 sq ft, in good shape but needs a little sprucing up, $47,500, great neighborhood, will easily rent for $800.
Long version: We already own one SFH rental which has worked out great for us so last summer we started looking around for another opportunity. We found this small home for sale directly across the street from the elementary school that I went to, a block away from a nice little park and a community pool. The asking price was $65,000, we checked it out and it turned out it was an acquaintance who was selling it after moving out of state. I exchanged a few emails with the guy but due to changing employment circumstances on my part, we decided not to pursue it. Out of the blue today, I received an email from him saying they're dying to get rid of it and he's willing to let it go for $47,500 which is his break even point on it (for what it's worth, the current Zillow estimate is $76,000). I'm not completely sure why it has sat on the market so long, about a year. A couple of possible contributing reasons, it's an older, small 2 br/1 ba home in a family oriented neighborhood and it definitely needs some work, minimally along the lines of interior repainting, refinishing floors in a couple of rooms, a couple of new windows, possibly a new roof in the not so distant future, old kitchen appliances, bathroom that needs retiled. It also has a "true" basement, all concrete, damp, occasional running water after big rainstorms -- this is where the laundry hookups are. It's really not in terrible shape though, we tossed around the idea of actually moving there ourselves to take advantage of only needing to put 3.5% down and renting out our current home which would cover the mortgage on both houses (ultimately we decided we liked our current home too much).
I would estimate it would take about 2 months and ~$3-4,000 to spruce up to acceptable rental condition and it would rent for $800 in a matter of days (based on experience from our current rental in a similar type of neighborhood, similar size). Annual insurance would be about $400, property taxes about $1,200, B&O taxes 1% of gross rents so $96.
Potential upside --- growing our rental "portfolio," monthly income from the two rental properties would cover their costs and pay for the mortgage on our own home.
Potential hangups---it would essentially wipe out all of our cash savings. I'm not working as I started med school last year and we're living on my wife's modest but secure annual income, so if anything were to go wrong we might be in for a tough ride. On the other hand, I'm not very worried about any financial calamity as we have solid equity in our home and our rental, and otherwise no debts (other than student loans, different story, will be dealt with upon graduating med school and starting a high income profession in a few years).
What are your thoughts? Am I trying too hard to believe it's reasonable in our situation or is it one of those opportunities that sounds risky on the surface but is actually financially smart in the end?