Potential BRRRR in West Michigan?

[Brett Fitzgerald]

Hi BP, I've been looking for my first deal and I have very little startup capital, so I'm looking to rehab with investor money, then cash-out refi to pay them out and keep the property as a rental (Brandon's BRRRR strategy). There is a property I've been watching and it's been at $45k for a while, but just today I saw that it is going to auction tomorrow on auction.com with an opening bid of $10k. I've never done anything with buying at auction, or on auction.com. My agent and I walked through it (he's flipped a couple homes and owns 4 or 5 rental properties himself) and estimated the rehab costs at $40k, ARV at $90k and the rental income at $900/mo. Based on that, this is what I came up with:

Purchase Price: 15k
ARV: 90k
Rehab costs: 44k (4k in holding costs... not sure if this is accurate)
Total cash investment needed: 59k

After rehab:
Cash-out refi to 25% equity: $67,500
Investor payback with 12% interest: $66,080
My personal net: $1,420, plus a house that cashflows for just under $100 / mo (est 10% for vacancy, mgmt, capex, and 5% for maintenance  / repair).

So even if I can get it for $15k, I don't make a ton on the flip, but it cashflows very nicely. Do those numbers make sense, or am I missing something? I don't know much about tax liens, etc. Are there potential issues there that I need to investigate? What would be the best way to pursue those?

Thanks!
Brett

[Jake Thomas]

@Brett Fitzgerald its good to get creative and start thinking of ideas but this is a lot of work for a house that cash flows under $100/month don't you think? Not trying to be negative but I am in the same market as you and I think there are better deals to be had around here. When houses go to auction.com they rarely go $10-20K like the opening bid shows. Most banks that own the asset have a reserve and that reserve is very close (probably about 10%) from what it was listed at on the MLS previously. I am not saying its not possible but I have been through several auction.com properties that were once listed and this is what usually happens.