Deal Analysis - Am I overthinking ??

[Muks M.]

Looking for advice from seasoned investors for a potential offer I am going to put together. The house is in the market for now over 100 days and is a short sale but may satisfy 1% rule for buy and hold strategy.

Details below:

List Price:155,000

Potential ARV:~190,000

Rehab cost :~30,000-35,000 

Rehab cost breakdown (from my realtor who has done quite a few rehabs himself over the years and seems to know what he is doing unlike me who does not know much about rehab!): 

• Roof (Shingles and wood replacement as there seems to be a leak)= 5000
• Paint (entire home) =4000
• Hardwood (first floor)=2500
• Carpet (stairs/second floor)=2500
• Windows=4000
• 2 sliding doors/8 standard doors=3000 
• Kitchen remodeling/appliances=3000
• Powder room remodeling= 1000
• Main Bath room remodeling = 2000
• Junk removal and cleaning (owner may not remove his stuff given short sale) = 2000
• Potential mold remediation (roof leaked and perhaps mold exist) = 2000
• Ceiling repair in the family room (there was leak in the ceiling from first floor bathroom) = 1000
• Miscellaneous = 2000

Monthly Rent = 1500-1600

Monthly Expense = 1400 (PITI, HOA, property management, vacancy = 5%, repair = 5%, capex = 12.5%)

Monthly cash flow= 100-200

 I am wary of the following facts, so any comment on any of the following will be appreciated:

• The estimate on rehab cost may be completely off 
• Why no investors put an offer on this for 3-4 months where finding 1% rule properties are really tough
• What would be a good offer price where I feel embarrassed on my offer as well as don't offend the agents/seller/lender

I am leaning for an offer of 120000 (or may be lower ?) and cap myself at 125000. If I get it at 125,000, then with rehab cost added (if the estimate is correct ?), I am looking at ARV of 155-160,000 which is still 15-20% lower than FMV for comparable homes.

Looking forward to some advice!!