Critique My Entrance Strategy On Investing

[James Ashley]

I'm considering making a move on my first property but I want to seek the outside opinions of experienced people first. I'll be the first to admit that it's a nontraditional way to obtain a property but I'll try to explain my view point. Just to give you some background on me. I'm married, have a baby on the way, work a full time job and travel during the week. I worked in residential construction for 6 years so I have knowledge but I also know my limits and when to sub things out. Now to the property. It will be a buy and hold. It's a 3/1, 1225 sqft, built in 1950. Has been vacant for some time. The home is in a nice part of the county close to schools and colleges (my area is more rural than urban). The arv is 100-110k and comps in the area are even with this. Current price is 50k, down 10k since being listed in June. Rent would be around the $800 range. Property tax is $625 yearly and insurance would be around $750 yearly. Seller is offering owner financing at 8% for 20 years with 20% down. The house is going to need a MAJOR rehab. From what I can tell the house needs a new roof, HVAC, has evidence of water damage from a hole in the roof (collapsed ceiling and water damage to subfloor), kitchen would be gutted, and windows replaced. There are some walls where the sheet rock could be salvaged but most would have to be demoed and replaced. Essentially a full gut minus plumbing and electrical (as long as inspection is good but not ruling it out). I have rehab costing around $50-60k ballpark with me doing some of the work and subbing out the larger jobs I'm not comfortable with/have time for. This is a rough number and I'll get a more exact number if I choose to go further with this.

So now that everyone is thinking "Run!" let me explain why I'm even considering it. One of the major attractions is the owner financing. I'm having a hard time finding a traditional loan that the property/I will qualify for. HML's scare the s*** out of me. Mainly because I'm unfamiliar with them but also for the potential for something to go wrong and me not have the means to repay it in the short amount of time necessary. PM hasn't been an option because this is my first investment and me being new to the field. So the owner financing affords me a way in when there are few opportunities. I'm hoping to get the property down to at least 35-40k for purchase. So after down payment that'd leave me with a 28-32k loan (not counting interest) at around $350/month. An amount I could "float" on until finding an exit if this doesn't work. All in price of 85-100k. Once the house is rehabbed I'm considering doing the BRRRR method and pull out 60% of the equity only. This would keep my mortgage cost low, pay off the owner, and free up cash to put towards a new property. I know this is counter productive to what is said on here but I'm fine with the rehab taking some time. I'll take the loss I'd lose on not renting quickly to be able to "get in the game". All cash flow would go back into the property as I'm fine financially on the personal side. So there it is. Feel free to critique my idea and tell me my pitfalls. All help is welcomed and I'm thankful for it.