I got excited recently when I found a home with an attractive ARV and rent characteristics on the market. The biggest flaw/opportunity here is that it has mold and the water intrusion that caused it. That's expensive to remediate but also scares off a ton of buyers, so I gave it a look. To picture the place, it's not a complete wreck. It actually looks good for the most part. The interior is mostly original from 1978, kitchen and baths are clearly run down but someone is currently living there and the mold is not visible beyond the areas I'll note below (I know, it could be hiding in all kinds of places) Here's the analysis I did. How would you improve this?

Home type: One level crawlspace foundation SFH in Triad area of NC, claims 4 bed 2 bath 1500 sq ft. Worth noting nearby houses of same sq footage are 3 bed 2 bath and this house has one bedroom with odd dimensions, suggesting it's not really a bedroom to me.

ARV: Comp analysis from realtor says $190,000 if fully overhauled and remediated.
Rent would likely be $1,500 or better.

An existing estimate provided by listing agent notes water damage with mold around fireplace, master bath joists and subfloor, second bath joists and subfloor, and second bedroom exterior-facing wall and ceiling. The estimate to fix the water damage, not the mold, is $21,500.

I assumed a worst case mold cost of $50,000.

There would be further costs to actually bring it up to modern standard.

Treating this as a BRRRR I worked backward from the ARV, wanting to be all-in for 70% I figured purchase and reno cannot exceed $133,000. Accounting for known reno costs (water+mold) subtracted from $133,000 I get a purchase price of $61,500. If I were ok with being all-in for 75% the offer could go to $71,000 but entails higher risk.

If it were purely buy and hold with rent at $1,500, $7,000 in closing and same reno costs, I couldn't get better than 10% cash on cash return anywhere above $45,000 purchase price (per Biggerpockets calculator).

This analysis seems to show the property is not a good deal. Is it wrong to worst-case the mold cost? Better to offer at the (already reduced) asking price and negotiate down after getting remediation estimates? This would be money blown if the seller would never accept the low price required to make a profit here.


I'll note too, and perhaps relatedly, that investors around the Winston-Salem/High Point/Triad area seem to be paying higher prices than I can understand given returns. Either I'm doing it wrong, or they are.