Help Analyzing My First Foreclosure

[Brad Noe]

So here is my situation and I just need someone from out there from the wonderful BP community (you're my hero @Brandon Turner) if possible, because this admittedly IS my first rodeo:

- I've been watching the MLS in this area daily for the past 6 months, so I know market well, but this is my first foreclosure I have seen that really piqued my interest. 3 bed/2 bath 1,200 sqft w/ unfinished basement and large backyard.

- Good bones, good neighborhood. Owner took off with his new girlfriend about a year and a half ago and it has been vacant ever since. Just released onto the foreclosure market yesterday. 

- Power was out for an extended amount of time which caused the sump pump to back up and flood the basement about 6-10 inches but it appears that Fannie Mae went in and cleaned everything up after getting the power restored. It is a big basement and only one corner of it is drywall/wood panel, the rest of it is concrete which they cleaned and painted already.

- Upstairs has some mold on the walls but the stench was not overwhelming and it appeared that we would just need to clean and paint.

- Listed at $40,000 and there have already been a few other investors in to take a look today.

- I am no expert on rehab, but here is my best try:

- Upstairs: clean/paint walls, paint cabinets, remove carpet in living room & refinish hardwood: $10,000; new window trim: $500

- Basement: minor mold remediation: $1,500

- Exterior: damage to wood panels above front porch: $500; landscaping: $1,500

- CapEx: roof: $8,000; furnace: $3,000

- Appliances: refrigerator: $800; microwave: $200; dishwasher: $400; W&D: $600

- Miscellaneous: clean-up, etc: $3,000

- Total: $30,000

Now, let's say I pay full price at $40,000 w/ 25% ($10,000) down. I found a great local mortgage lender that works with investors and loans money for rehab properties. That makes it about a $60,000 loan ($30 purchase, $30 rehab) with a potential $110,000+ ARV. That's a big payday for me if I chose to flip!

After repair it would rent for about $900-1,000 w/ a potentially $380 mortgage (projecting 5.5% interest). Using 50% rule, that may only yield ~$70-170 cash flow.

So my question is, as a new investor with a goal of building passive income, should I flip this home and roll the capital into future rental property investments given the apparently more favorable spread for the flip vs. the rental cash flow in this scenario? That is what I am leaning towards although my strategy has always been buy & hold to build passive income.

ALSO - is there anything anyone can spot that I might be missing in my numbers above? 

Lastly, are there any other considerations for buying a foreclosure that I need to take into consideration? I am doing some research on the process before I make an offer but thought I would throw it out to the forums to hear your expert insight as well.

Take a look at the pictures:

Thanks so much for anyone that may choose to read through this and engage me with some advice. I hope to have the opportunity to pay it forward 10X one day to the next generation of newbies!

Cheers,

Brad Noe