VA Foreclosure SFH rental purchase questions/ analysis

[Joe T.]

Hi everyone,

I've been looking for my second investment property and I stumbled upon a VA foreclosure. It was listed at $122,900 last week, and they recently dropped the price to $112,900. Homes in the neighborhood are selling for $135k -140k. My first rental I bought was "move-in ready". I wasn't really willing to tackle a larger project, but after being successful with my first rental for 5 months, I'm after something that is more risky, but will generate a higher return. My main concern is that I always question why nobody else has bought X home, especially since this one has been on the market for 60 days. It is 1698 sq ft and is a 3 bed 2.5 bath. I am willing to forego a higher % return in exchange for higher quality tenants in the B to A- range.

Here are the numbers -

Purchase Price:

$112,900.00

Purchase Closing Costs:	$4,000.00
Estimated Repairs:	$3,000.00
Total Project Cost:	$119,900.00
After Repair Value:	$135,000.00

Down Payment:	$22,580.00
Loan Amount:	$90,320.00
Loan Points:	$0.00
Loan Fees:
Amortized Over:	30 years
Loan Interest Rate:	4.750%
Monthly P&I:	$471.15

Monthly Income:$1,250.00 Monthly 

Expenses: $978.24

Monthly Cashflow: $271.76

Pro Forma Cap Rate: 7.44%

NOI: $8,915.00

Total Cash Needed: $29,580.00

Cash on Cash ROI: 11.02

Purchase Cap Rate: 7.90%

This house needs a few repairs, most notably is the mildew/ mold in the upstairs bathroom, a garage door that is off its tracks, a broken window, a missing mirror, and some carpet that needs to be replaced. Thankfully the kitchen has brand new cabinets and everything appears to be fine in there. I'm also concerned that since the house has no electricity, I won't know before getting it inspected if the AC unit is working, or the water heater. 

I'm just looking for someone else's opinion and what they think about this potential rental.