No one meant to say that this is not a good deal at the asking price. Your intent is to hold indefinitely for the production of income, so you are buying the cash flow the property will generate. Mike and others are simply saying that you may not need to pay quite so much to get it.
If you can buy at a lower price, you make a good deal even better.
I am saying that you don’t really know the true market value of this property. If you get the active listings for the neighborhood and see that similar properties are selling for $10K less, then you know that $60K is overpaying for this property. If the comps show that the average sale price for a similar property is $80K and that active listings for similar properties in the neighborhood are all asking even higher prices, then you may get a sense that $60K is a good price.
Also Mike pointed out to consider the expenses for advertising, legal fees, evictions, utilities during vacancies, capital expenses. How much do you typically set aside for them ?
In the preliminary stages, you allocate 50% of your expected rental income to all your costs of ownership and rental operation. Start by pretending that you own the property free and clear. If you are projecting $800 monthly rent, then allocate $400 to taxes, insurance, advertising, legal fees, vacancy, leasing fees, management fees, and anything else you will still have to spend for maintenance and upkeep whether or not you have a tenant in place.
This leaves you $400 per month to pay the debt service and to pay yourself whatever monthly cash flow you need. Since you are already allowing $319 per month for debt service, your preliminary estimated monthly cash flow is $81. Not quite the $100 minimum monthly cash flow that Mike advocates, but close enough to proceed to a more detailed cash flow analysis and to nail down more specific cost numbers.
The first place I would start is your cost of financing. Is 7% the best you can do? Last month, Countrywide offered me 6.5% investment financing. Can you do better in your area with a local bank? Also, can you lower your cost of financing by buying at a lower price?
Next, get accurate numbers for property taxes and hazard insurance. These will be your biggest ticket operating costs. Property taxes are public record. Get a quote from a couple of insurance companies for a landlord policy. Plug all your known numbers into your cash flow estimate. Once you know property tax and insurance costs, do you still have money left over from your $400 operating cost allowance to cover the unknowns?
Do you have a marketing plan? A lot of advertising can be done for free or nearly free, such as internet advertising (e.g. Craigslist), computer generated flyers, bulletin board postings, registering at college/military/section 8 housing offices.
You can plan to contain your overhead costs by self-managing until you see whether you have the cash flow and the need to outsource management.