Analyze my Unique Rehab Deal!

[Robert Haworth]

Not marketing this deal, just asking for advice on it.

I am moving to the Irvington sect. of SW Baltimore for a day job that will last 9 mos, and am considering buying an FSBO (for all cash) that I already have my eye on there. I have personally toured the prop, and it looks very good. It's an estate that's been marketed (poorly) by the heirs for the last 4 mos. They have a clean inspection report and appraisal for about $61K.

While in residence I'll manage my GC in doing fairly light rehab (KTN, electrical, Bsmt spruce-up) to the 1280 s.f., 3/2 brick row home, which has an est. ARV of $88,000. Repairs & improvements will run $12,525, after 15% fudge factor.

Exit strategy is flip to retail in the last 2 mos. of my residence, trying to get it under contract within 45 days for the $88K, with seller financing to move the house faster. We are prepared to accept moderate credit challenges on buyer's part.

The planned selfin terms call for 10% d/p and all buyer's closing costs financed; 15 yr. note with a 5 yr. effective duration (baloon refi -- if allowed by then -- with some commercial lender) and int. rate of 7.5%.

This would yield about $754/mo. P&I to me, and have the buyer facing a $1,021 total monthly payment. (PITI). Median rent for similar homes within 1/3 mi. is $1,025, so they can basically buy my flip for what it would cost to rent it.

Questions: 1) Does this seem like a worthwhile endeavor? Direct profit on sale is $18K-$20K, with another $27.5K in accumulated selfin interest over the 5 yr. term. 2) Any red flags you see?

Thx! Robert