Tell me why this is a bad idea
Disclaimer: I'm still pretty new to all this...
So, I've been reading up on HUD and how the properties that it sells work for investors. I had a thought that seems pretty simple (which makes me immediately think that I'm missing something).
A hypothetical scenario: Let's say I find a SFR on the homestore site that I want to make an offer on. I do my math and figure my offer price based on ARV and an intentionally inflated repair estimate (seeing as I haven't seen the inside in person). Now, let's also say that I have almost none of my own money to use -- I could pay the $1000 earnest money deposit out of pocket though.
So if my offer gets accepted is there anything wrong with taking out a hard money loan for the purchase price and repairs, then retailing the house once the rehab is done? I mean, it's all about the numbers right?
If I could find a deal that was discounted enough for me to be able to afford the 14% plus 6 points the lender will charge me, plus cost to sell, and still walk away with a profit, is there anything wrong with that? Are there factors I'm not considering? The way I see it, the biggest hurdle -- and maybe an insurmountable one -- is going to be finding a deal that's discounted enough for the numbers to work.
What do you think?
Thanks in advance!
(PS. I've also been considering the same scenario I described above, except instead of HUD I'd be buying from wholesalers.