Doesn't work out as a BRRRR but it cash flows GREAT!

[Rhyetta Musser]

I'm super excited to have found a property that might be my first real estate investment! (I have owned a duplex before but it never cash flowed for us). Here are the details. If you have any input, I'd love to hear it--before I make a big mistake!

I've been approved for a HELOC for $16,500. I'm going to use that as a down payment on a single family home for sale for $55,000. (I plan to offer $40,000 and see where things go). I'm then planning to get a construction loan for the purchase price plus $30,000 for rehab to turn the single family home into a duplex. It's an older home, not very pretty, but it has 4 bedrooms and 2 baths. I can split the house in half and have a front unit and back unit. Even the yard is fenced in half. It is zoned R2 so it legally can be a duplex.

Once the purchase is made and the rehab is done, I expect it to appraise for $90,000. This is low but our area is depressed and the comparable sales run between $60K to $100K. This is why I don't see that it could work as a BRRRR. I could only pull out 67,500 when all is said and done and I might have put it as much as $85000. But the cash flow is good!

I estimate the rents to be $650 per unit ($1300 each month).

            $1300 gross rents

-$462 PITI (30-year fixed)

-$130 Vacancy & Repairs (5% & 5%)

-$234 Capital Expenses (18%)

= $474 cash flow ($237 per unit)

Am I forgetting something? Does this seem good to you?!