@Rowdy B. - Here are some quick thoughts...
1) I despise the 70% rule. As an investor, it is my responsibility to know the costs associated with the transaction and not to rely on 'rules of thumb.' The 70% rule indiscriminately groups costs that have wide ranges and produces a MAO with NO indication of PROFIT. Why anyone would enter a deal without understanding what they are going to make is beyond my comprehension. All of that being said, the formula is MAO = 70%ARV - Repairs (not total costs). Thus, the MAO would be $67,500 which is much closer to the $75K calculation.
I'll step off the soap box now...
2) Your agent represents you and should be the person you rely on for accurate market knowledge including comps, rental rates, etc. If your agent isn't capable to do this, find one who is. Do not consider anything the seller's agent has to say of any value. He / She has a fiduciary duty to get the best terms possible for the seller. Personally, I consider most everything on Zillow to be equally worthless.
On to the rehab...
3) In my area, $20,000 seems reasonable for the repairs you list based on the level of finish that a $125,000 prop requires. The only 3 things that concern me a little are 1) why does the basement ceiling need to be replaced? Water? Is the leak fixed? and 2) If you are painting the exterior, does this mean the house is wood siding? Is this common for the area? 3) If the shingles are that bad, is the roof leaking?
If you are comfortable with the answers, then I think you are in good shape. getting a few quotes would be great if you have the time.
4) As I mentioned, you should calculate your MAO using MAO = ARV - Profit - Closing and Carrying Costs - Repairs. Since you are paying cash, you wipe out all of the bank fees, a portion of the legal fees, and the interest payments. Depending on your agent, the biggest expense in this category is likely to be the commission when you sell. Regardless, $10k seems like it would cover anticipated costs excluding carrying costs while rented (see below). If you were just flipping it, I'd say your $75K number is right on if not a little conservative due to your agent saying ARV = $130.
5) The tricky part of this deal is the 2 year holding period. I'll argue you aren't buying a rehab prop you have to hold for 2 years, you are buying a rental you want to sell in 2 years. Thus, there are many other factors to consider. For instance, do you delay some of the updates until you are ready to sell so that the items are new for the buyers not for the tenants? Do you anticipate the market to be steady? Appreciate? Depreciate? I wouldn't count on appreciation, but it's better if your agent thinks values will go up rather than down.
6) Given the 2-year restriction and your stated goal of selling the property, I'd strongly consider finding a tenant-buyer who wants to do a lease with an option to buy. You might miss out on a little appreciation, but the tenant(s) will be more likely to keep the property in good shape as they know it will one day be theirs.
7) Your rental analysis doesn't include vacancy, repairs, management fees, insurance, or taxes. The monthly yield will likely be more in the $450-600 range. Thus, your 2-year profit would be about $32k. That's better than 15% annually!
Overall, it sounds like a good deal. Paying cash gives you plenty of exit strategies and the opportunity to adjust your plan over time. I hope this helps a little. Good luck!
