What am I missing?

[Alicia Hensley]

I found a seller who is selling two distressed houses. Both of them were purchased at auction and they have no mortgage. The owners said they would make a deal if both were purchased, and an even better deal if they are the contractors (they are licensed  and insured). Here's the breakdown;

House #1: 

sell price $79950

Rehab cost: $40000

ARV: mid 200's

Rent: $1200

House #2

Sell price: $49000

Rehab: $30000-$50000 

ARV: $175-$185k (if converted to a duplex)

Rent: $700 or $1000-$1200 as duplex

I brought this to a mentor I'm working with who is also a buyer. He doesn't seem terribly interested...am I missing something? This seems like a good deal to me.