Advice on Potential Deal in MI - walk away or buy and sell?

[Hilaree Fraly]

I am in a position to purchase a house from my landlords of three years. They have decided to sell me the house and allow me to place the last three years rent payments towards the asking price, with "back interest" added. They are asking $115,000 for the house, and the math shakes out to be a final price of $104,000. After running comps in the area (I plan to get it appraised before I make ANY final decisions), the house is expected to land in the $145-150,000 range, and the landlords know of this but they are older and just want to get rid of the house and are found of me, etc, etc... Anyway, SEEMS like a great opportunity to buy and have equity almost instantly? I have been looking into 1031 exchange if I do buy. If I do buy, I would be doing a conventional loan, so estimating around 20% in a down payment.

However, I am wondering if I should instead take the 20% (~$20k) and walk away and look at lower costing properties, as my goal is single-family rentals? 

I just want to be very strategtic with this money and wanted to reach out to the forums to see if anyone had any kind advice to throw my way! Thank you in advance!