How much should I pay?

[Ben M.]

Hi there! Thank you for taking the time to read and respond to my inquiry.

Salient points:
Very unique property was purchased by an investor for $110,000 cash in January 2012. I considered buying it six months or so before it eventually sold, but didn't because it was listed for $169,000 and couldn't be financed due to needed repairs.

I fell in love with it, and wanted to live in it. The floorplan is 31' square, 961 square feet total with 0 bedrooms and 1.5 bathrooms. It needed to be completely renovated. It's unique because it sits on a hill (in Orlando!) overlooking a lake. In addition, there is a garage the same size as the house underground, that can be accessed from either the right or the left of the house down long driveways.

Investor posted sign in the yard with renderings for a house that is more than 3000 square feet. Investor, through his agent, states that he has about $165,000 invested, which includes engineering fees and architectural work to plan for the huge renovation. I don't want to triple the size; I just don't need that much square footage. I don't want to ruin the character of the house. I would like to buy it as-is, but potentially partner with the investor to provide construction financing to complete a 600 +/- addition to the rear of the structure that would have two or three bedrooms and at least one more bathroom.

Here's my thinking:
Prices have risen here about 30% since January 2012, so $110,000 + $33,000 = $143,000, but I don't want to pay the investor for the money he has shelled out for engineering and architecture work. I don't want to build the addition that they planned. I know it will leave a bad taste in his mouth if I try to go that route.

Investor's agent states that she believes they could list it for $190,000. I would probably be willing to pay up to about $175,000 (bank loan for 80%). But I will need a source of construction financing from him, possibly a second mortgage, to make it into what my partner and I need (e.g., two real bedrooms, another bathroom, and a rooftop area to overlook the lake). I think we can accomplish our wants for $60,000 - 70,000.

How can I approach the seller and work out a mutually-beneficial deal for both of us?

Thanks so much for your help, and please let me know if you need me to clarify any details.