Introduction and sharing today's opp

[Emile Papillon]

Hello, My name is Emile and I'm new to this forum. 

I have always had curiosity and interest towards real estate but I actually started investing last year. I was paying a $800 rent and found a nice little house with rehab potential for $ 123 000, converted the unfinished basement into habitable space with a bedroom/bathroom, a laundry room and a multipurpose room. I put up walls, drywall, did the flooring and plumbing for the bathroom, including relocating a floor drain. This was my first time and I really enjoyed my experience and now I am considering a second project - this time a flip - and I am actively looking for an opp. 

I have read the How To Invest In Real Estate Book and think it's very inspiring and useful. 

I wanted to share my experience today and get your opinions on a specific opportunity, but first let me share my general strategy (still a draft). 

My ultimate goal is to get a portfolio of properties with good cashflow and hold on to them. I recently came upon a single family house that would have required a ~$ 25k down payment, with no rehab potential and according to the 50% rule would have brought around $ 150 cash flow. I realized this is not what I need to be looking for at the moment. Not having rehab potential makes the property not suitable for BRRRR. $150 is not enough to justify immobilizing 25k in capital with no refinancing possibility.

So I started looking for a house to rehab for BRRRR or flip and I came upon one today that seemed ideal. Asking price was $79,990 for a ~1600 sq feet single family two storey that would easily go for 175000 in this neighborhood in good condition. I ended up deciding against, for the reasons to follow.

What a lovely kitty !

Electrical needs complete replacement (wiring, electrical box) but the house has newer roof and appliances (heating and water heater are recent), and the plumbing looks recent, which is all surprising given the state of the rest of the house...

It's basically a roof and a brick frame with appliances. Everything else has to be refreshed :

• Floors (carpeted, heavily spoiled and cat urine odor)
• Ceilings dry-wall
• Walls dry-wall
• Electrical is out of date (knot and tube all over, electrical panel needs replacement)

Risks:

• Sanitization (cat urine smell, potential for pest problems)
• Structural integrity not checked (unable to check in a timely fashion due to deadline)
• Evidence of water damage on main floor ceiling, extent of damages unknown
• No smell of mold in basement but knowing the city history of flooding, this is uncertain
• Plumbing looks recent but it was hard to be absolutely sure of this assertion

The reason I decided against in the end : too many unknowns. I was also not prepared to analyse a complex rehab. My cash safety margin was also too thin to support huge rehab costs with large uncertainty. I was unsure of how to finance and the rate I would be getting. I had an unreliable estimate of rehab costs due to not having a trusted contractor / inspector available to help and give confidence (I am the one who ballparked the rehab, I was thinking roughly 65-70k). The last reason is the market is crazy in my area and this particular house had already 5 offers (according to the realtor...) and we would have to offer about 20k over asking to stand a chance, reducing the estimated profit margin to zero. I saw about 20 realtors business cards on the kitchen table and the house was listed only for a week. 

I hate having to back off of an apparently great opportunity and I am still not 100% sure this was the right call because my estimates are not reliable. For next time, I want to have a contractor by my side to provide support and a good understanding of my financial position. A mentor would also be of valuable help... I need to network in my area :)

Anyways, comments welcome. I hope you enjoyed my story.