Renting current home while fixing up REO
Hello,
There's an REO property in my neighborhood (all built around 1990) that was purchased by the bank for $88k and Zillow estimates it will sell for $95k. Comps in the neighborhood with the same floorplan have sold for $140k-150k. The house appears to be in pretty good shape. I'd bet I would need to put in between $10k-20k at the most and would take me 9 months - 1 year in my spare time.
My idea is to rent out my current home (only a few houses down) for $1600-$1700/month (another home slightly bigger than mine in the neighborhood lists their rent for $1800/month). Running it through the SFH excel spreadsheet I found on here, I would be just slightly less than break-even for the year taking into account potential maintenance, vacancy, etc. But I would be gaining equity in my current home while using my day job to service a lower mortgage on the REO property while I fix it up to either sell or rent.
I'm sure I'm wearing rose-colored glasses right now but it seems like a decent way to build equity in my current home (which we had $50k renovations done in 2012 when we purchased) while getting another property ready to sell or rent. I would appreciate other considerations I should be thinking about while my agent looks into the status of the foreclosure and I get more into the details of this idea.
This would be my first entrance into REI and I'm very excited but want to make sure I cover as many bases as possible.
Thank you!