Determining a plan of action

[Jeremy Basiger]

Hello everyone,

I am new to real estate and have been researching and soaking up as much information as I can over the past coupe of months. Just over a month ago I found a potential BRRRR or fix-n-flip property. The property is REO and last year assessed at 96k however after being foreclosed and unattended it currently is being sold for 36,900. This is a price drop made last week down from 45k. After looking over the property I have settled on about 15k in rehab work with much of the work being done by myself/family/friends.

I have talked to an investor and am having a home inspection done this coming week. Once the inspection comes back as long as it looks good we will hopefully move forward. My current plan is to get it ready to rent out by February which I believe is more than possible. During this time I plan to find a bank that will refi at 70% appraised value (comps in the area are around 115k) I would look to cash out, pay my investor and then continue to rent it out. The rent for the property would be between 750 -850 a month which I believe I could achieve. 

Where I become unsure is when I would start to approach this point. With my overall goal being passive income and longevity in the real estate market, I do not know what will be more beneficial to this end.

Here's what the math looks like

Investor money: 40k

Home cost + Closing: 38k

Rehab estimate: 15k

My cost: 13k (to cover the rest of rehab)

Appraised value: 85k (Low estimate to error on side of caution)

Investor ROI = 10% After Repair Appraised Value (IE $8,500)

Cash out Refi @ 70% = 59,500

= 48,500 to investor and then 11k back to me with a 30% equity in property and positive cash flow of roughly $150 or 11% COC ROI

The alternative to this is to flip the property, take the 31k profit (utilizing the 1031 exchange) and use it to invest in something else.

I also want to note that I currently set aside 2500 a month to invest in this endeavor. My credit is 740+ with about 20k in total debt (not including my home). I am not short on monthly income and have money saved up as well. I simply lack direction. 

I have been looking for a mentor in my area but have yet to find one. I seem to be finding a lot of newbies like myself, maybe with less motivation than my own, but that is about all I am finding. I work as a production supervisor and hold hours of 3pm-11pm. I am the type that may suffer from analysis paralysis. I continue to research and learn every day. Any advice is welcomed and greatly appreciated.