SFH Analysis

[Account Closed]

Happy Friday, everyone!

I'm dying to get started in real estate investing. I'm trying to analyze multiple deals every week to get better with numbers. I would also like to increase my presence here on BP to learn, and give back in return.

Yesterday I found a foreclosure on the MLS. Its a Fannie Mae property and has been listed for about 2 weeks. The current price is $109,900. Its a 3/1, 1800 SQ FT, 1974 ranch.

I try to analyze each deal as if money isn't a factor, so I'll talk about the entry/exit strategies first, then financing.

My realtor told me he's been in the house and it needs a little bit of work. It would need HVAC for sure. He mentioned there's a moisture issue in the basement which could be due to a grading issue. He thinks that the house in "tip top shape" would go for around $123k.

Lets also say I added an HVAC system ($10k?) and had other repairs (maybe up to 10k? contingency)

So, 70% of ARV = (used $115k for conservative) = $80.5k - 20k for HVAC and other repairs = $60 purchase.

Is it crazy to think that I could get this house for $60k?

Financing

My wife and I don't have a lot of money to get started. We have 1, and possibly 2 investors that are willing to work with us. Investor 1 has committed $50k at 8%. Investor 2 MIGHT commit $40-50k at 12% (high rate I know, but its an option). My pitch to both of them is to borrow the money in full, and I will pay all of the interest up front, with a balloon payment at the end of whatever term we decide for each deal.

My long term strategy is to hold rentals, but I understand that some properties may not be feasible and I may look to flip opportunities to increase my startup capital.

With above property, if I were able to acquire and do said repairs, and refi, I could possibly be into the property for $80-85k. With a $115k appraisal, I would be able to get a refi of $92k @ 5% (~$500/month). Paying the investors back would leave me with $7-12k in pocket. 

The downside to this is that I don't think the house would bring enough rent to make it work well.

Assumed rent = $750 x 12 = 9000 minus 500 for insurance - 1100 taxes = 7400 NOI minus 6000 for DS = $1400 CF.

The cashflow doesn't seem to be very substantial but maybe that's all I'll get just starting out? The 7-12k from the refi makes me feel more comfortable as far as an emergency fund, but at the same time, an unnoticed issue with the house could eat all of that up. 

What are your thoughts on this rental analysis?

If I were to flip and sell for $115k, I would profit $30-35k, minus closing costs...I think.

Would I be crazy to combine funds from both investors to tackle this? If I borrowed $50@8% and $40@12%, I would be 8800 out of pocket, just for acquisition. It would be nice if I could structure so that I didn't have anything out of pocket to start with though.

Thanks in advance for your time and advice!

-Andrew