My first deal??? What do you think?

So here is the deal that I am currently considering. I would appreciate your comments/suggestions:

REO property
3 bedroom/2 bath
1,300 sqf
Listing price $55,000
Estimated repairs at $45,000 (I believe I am being conservative - I don’t think I will need all this money)
ARV $160,000 (based on 3 houses that sold in the area - 2 in April and 1 few days ago)

I am planning to offer $35,000. The bank would probably not accept it. They put this house in the market 3 months ago for $99,000. They have already reduced it significantly to $55,000. Am I being greedy?

The numbers according to my calculations:
Down payment (20%) = $7,000
Loan (80%) = $28,000
Monthly Mortgage Payment (PI) 20 years @ 8% (NOO) = $234
Rental income = $1,000
NOI = Rental Income/2 = $500
Cash Flow = $500 - $234 = $266

I understand we should not consider the down payment when calculating cash flow (am I right?). In this case with 0% down the numbers would be:
Loan = $35,000
Monthly Mortgage Payment (PI) 20 years @ 8% (NOO) = $293
Rental income = $1,000
NOI = $500
Cash Flow = $500 - $293 = $207

I am planning to rent it.

My questions:

1 - On paper this seems like a good deal. My only concern is the amount of rehab. $45k seems too big for first house. What do you think?

2 - The previous owner started to convert the garage into a big bedroom and bath. I can either finish the work and create a 4 bedroom and 3 bathroom house or separate the bedroom/bath from the rest of the house and rent it as a studio. My feeling is that I could get more rents from 2 units (3br/2ba + 1 studio) than from 1 big house (4 br/3 ba). Any thoughts?

3 - If I decide to create the studio, should I split the utilities? Have power and water separately metered? If yes, I would need to install a separate water heater for the studio and mess with wiring. Any thoughts?

4 - Is there a minimum size that a studio should have? What I mean - do I need to worry about the size of the unit. Not sure if towns usually have a minimum sqf for a unit to be considered “rentable”. Any thoughts? Right now the studio would end up with approximately 328 sqf. Is this too small?

5 - how do you feel about inspections? I am being very conservative on my estimate. For example, I am considering that I will need to replace the heater, A/C, roof and all the flooring. As I was walking through the house, I added anything that I could not check - for example - the water is turned off so I couldn’t check the toilets. So I added them to my rehab estimates. I also included $3k in case I need to do extensive electrical work - i.e. rewire the house. Any advice?

Thank you all for sharing your thoughts/advice.

Sorry for the long post. I am a little bit nervous about this one. This will be my first deal.

Have a great evening!

Sounds pretty good to me. I like the numbers.

What kind of neighborhood is it in? Who will be the tenants? I think 328 SF is a little small for a studio. To put in kitchen, heating, cooling, bath could cost you $15,000 for the studio. It wouldn’t be worth it unless you can rent it out furnished for 3x rent. Also, a studio is much more attractive if it is a separate little house that can be private, not attached to another unit. It needs to have 2 doors, washer and dryer hookups to get maximum rent.

So I might pass on the conversion, unless you are right next to a university or hospital.

The numbers seem right as a single family house. Are there permits on that conversion? Does it make sense to convert back to a garage?

Good luck on your offer. We’re rooting for you.