Extreme BRRRR - Bank wants to negotiate

[Eamon Sullivan]

Hey Guys. 

I was under contract on a REO home that needed a roof, HVAC and foundation work. The foundation work turned out to be alot more than what was sensible ( Estimates from $20k-$25k).The bank wasn't willing to negotiate on the property. I decided to walk away from the property.

And now 2 weeks later, yesterday, the bank comes back to me willing to negotiate, they were not aware of the extent of the foundation. 

The asking price was $37,000. ( This price was based on the roof, hvac and minor foundation work)

The typical sale point in the area is $85,000-90,000

Rent for this house would be $950-1100

Estimated Repairs

HVAC $4k

Roof  $5K

Interior $8-10k

Foundation $20-25k

Land in the area typically goes for around $15k for a 1/8 acre.

I am considering purchasing for $20k ( too high, too low?) cash and would try to BRRRR the property.

Option 1: Pass

Option 2: Fix some of the outstanding items to make it rentable, HVAC and Roof. Minor repairs to the foundation. Rent the property until the building is unsafe and rebuild a entirely new structure. 

Option 3: Entirely overhaul the property.

Does anyone having experience trying to BRRRR a property with structural issues?

Has anyone been down this path? 

Thanks! 

[Jeshua Patrick]

If you went in it wouldn't make sense to go in halfway. Assuming 50k in repairs plus a 20k purchase price leaves you at 75% LTV with an 85k valuation assuming nothing else goes wrong. If the cash flow is good it might be worth the risk but honestly if the bank is willing to come down more I would try for 10k all cash, fix the major stuff and, if the cosmetic stuff looks to push you over, refinance @ 75% ARV then finish the remaining cosmetic repairs. If cash flow still wouldn't make sense then walk away.