Do the numbers work?

[Justin Insley]

Hello BP,

So I have been putting the foot miles in recently in my attempt to find real estate opportunities before they hit the MLS (or become foreclosed).

I have tracked down the owner of a 1,100 sqft cottage in my area, she had inherited the property after her mother passed away. She said she wanted $170k for the house but that was just shy of the ARV of the house, and this house was not move in ready.

After a thorough walk-through I estimated my rehab bill to be about $60k. This was including a $25k estimate that she had received for a mold problem in the basement. 

So my original offer was $90k for the house seeing comps being sold for $185k in the area.

She rejected my offer because she owed more on the house than what I had offered. Me being slightly naive, I ASSumed she owned the property free and clear because her mother owned it since the 70's. However, a recent refinance for a renovation in the back left them with a $149k mortgage to deal with.

The owner says that she wants out of the house at $149k (being that is what she owes). I do not see the numbers working if I were to purchase at that price.

My initial intentions were to buy and flip, would a buy and hold be a plausible option if I were to take over the mortgage?

Any advice is greatly appreciated!

-Justin