Good 150K cash deal or bad cash deal

[Joseph Collins]

I made a cash purchase of a SF hurricane Ida damaged home. I'm in the middle of the flip. Looking for forum feedback to help me understand if I've made a mistake or am on the right path still.  All thoughts welcome, deets below:

House arv $280K; Purchased w/cash for $150K in Dec 2021; In Jan 2022 got a $125K 12 month interest only renovation loan then monthly p&i at 4.75% for 3 years due on the construction loan and then variable interest rate based on prime for the next 20 changing every 3 years depending on prime rate. The contractor and I expect the work to be $80-90K. We asked for $125K to try and stay under budget. Our anticipated timeline is less than 3 months to finish. I pay 4.75% on the interest as I draw toward the $125K so if I don't use the full $125K, I only pay interest or p&i (when p&i becomes due) on whatever I've used at that point. The loan turns into whatever amount I actually pay the contractors for the work.

I told a finance graduate investor friend I did this and they told me it was a terrible deal if I paid $150K of my own cash because the most a bank will give me to refi is 70% of the arv. This would mean I'm looking at a max refinance loan of $196K and from that comes $150K purchase price + $125K construction loan resulting in -$79000 from an investment standpoint. What I didn't tell him is that I borrowed the $150K at a 3% interest rate (let's say from a HELOC) and can pay interest-only on it until 10 years when whatever loan balance is left will be due.

With the construction loan, the first 12 months are interest only. So assuming the renovation finishes in 3 months and I can refinance with someone at the 6 month mark from when I started, I'm estimating being out of personal cash about $5218.75 total (that's $375.00 on the 3% loan interest x 6 months is 2250.00, plus 6 months of 4.75% 125K construction loan interest is 2968.75 for a total personal-out-of-pocket-cash total of $5218.75). There are also carrying costs, but in a 3 - 6 month period they would be $1K or less so I left that number out.

At that 6 month renovation completion point (which in reality it will very likely be a few months sooner than that), I can refinance the property and then rent it for about $2000 - $2500 per month (according to current comps for excellent condition houses in the same area) or sell it for the $280K (or a little less).

My two questions are a) is my friend right that it's awful if I actually used my personal cash and b) is it actually a very good play based on what I actually did?

Also, open to any thoughts on going forward from the point of construction work completion when the single family home will be habitable. I haven't decided for sure yet if I want to flip or rent it. I may flip since the area is clearly prone to flooding, but I would prefer to keep it as a rental and just deal with it. After having had to fix two other flooded Ida rental properties that I already owned, I'm not as afraid of that process as I would be had I not just gone through it.