estimate from GC is $40,000 in mold damage and repairs. If true, could bring a $50k profit once rehabbed.
What gotchas am I missing? Would you avoid at all costs?
Get 2 more quotes. That seems high unless the house is super huge. Ive bought several but I try to buy my rentals at 800-1200 sq ft
If the profit is there, then yes.
One thing to consider is proper remediation and being able to prove it. There are a couple of ways to accomplish this. One way, you can hire a mold remediation company and get a mold certificate after. Or you can do it yourself and document each step. Do it right the first time because once you close up the walls, it will be very costly to redo it. You may even get mold testing after completion to prove that the job was done correctly. Depending on your state laws, disclosure may be a requirement.
One disadvantage may be the fact that some potential buyers may be turned off because of this.
Almost every old house has some mold in it somewhere. If you take the correct steps to address the existing mold, either professionally or DIY, and remove the source of moisture, then it should be good. I have had several homes with mold issues and have hired licensed professionals to do remediation and watched their processes closely, and I have addressed it myself, both with the same results. Now I am talking surface mold, if it is so bad that framing has to be removed, that is another story entirely. One that can still be doable, but you are now talking reframing, etc.
If the numbers make sense, then the smell of mold smells like money to me. Most people wont mess with it and I can get the price down. Get multiple quotes to get comfortable with numbers and go for it if they work.
Best of luck.