My uncle has a deal for me. What do you think?

[Nathan Oakes]

So my uncle has a friend who has a house that is for sale in a lower income residential area for $15k. The whole inside of the house needs to be gutted and redone and needs a back porch and a couple of windows need replaced. He is willing to front me 15k, but he thinks the house needs 20k to renovate if I do the work. He knows how to do it all and will show me so I will have a good teacher. The house and property is currently listed as only being worth $27,000. My hope is after renovation the house would be appraised for more. The problem is, is that I do not have the 20k. I'm wondering if a hard money lender would help me out with that? Do you think this deal would be worth it? I want to make it a Rental.

[Whitney Hutten]

@Nathan Oakes... Hope is not a strategy, my friend. Just from what you have shared... I have some real concerns. First, your ARV puts you upside down by almost 10% already. These type of homes tend to not hold any value nor appreciate well UNLESS it's in a development area on the city Master Plan. Next, lenders don't want to make loans on projects of that size (nevermind the class), so you are probably in for all cash. Also, statistically speaking, lower-income housing can have higher vacancy and higher turn costs due to damage and evictions. What would this property rent for?

The question is, how many headaches are you willing to deal with?