Looking for help analyzing foreclosure

[Logan L.]

BP family, I am currently looking at a foreclosure located in a good area of a small town near several schools and businesses. It is a 3 bed 2 bath, 1,700 sqft. The price recently dropped from $63k to $49k. The only apparent necessary capital expense is redoing the roof. My realtor estimated that if I put $20k into it, it would sell for approximately $120k (current Zillow estimate of property value is 90k). I would likely have to take on a partner to afford the down payment (I have a partner lined up for this specific deal). The Zillow estimated rental income is around $800. Income minus $400 for expenses (50% rule) minus $378 (P&I, insurance and taxes) leaves a pitifully small $22 cash flow. This property is appealing to me because it is selling so far below market value but I'm concerned that if I was stuck with it for a while, I would only break even or possibly lose money on it. I would love to hear your thoughts on the situation, although I am struggling to even come up with the right questions to ask. Thanks so much for your help! Logan

[Jeff Kehl]

@Logan L. Have you or your realtor run comps on it? You should know what all of the houses that have sold in the last year around that house have sold for. It's suspicious to me that Zillow says $90k and your agent says $120k. 

Also what is your competition? What houses are currently on the market in the same area and price range that you would be competing against? How quickly are houses selling in that area (average days on market)? How many months of inventory are on the market? Has that been dropping or getting worse?

How long do you project the rehab to take? We're entering the winter sales season are you prepared to hold until spring?

Do you have a list of the items you'll want to repair together for your SOW? Have contractors lined up? Have any of the contractors looked at the property?

Are you prepared to hold it as a rental if it doesn't sell? Are rentals in that area in demand? Will you have to pay back your private lender in that case and what's your refinance plan? 

Your numbers sound good but do as much homework as you can because most people lose money on the first house they try to flip.