Seeking advice on first BRRRR purchase

[Cory Melious]

Hey y'all;

I'm looking for some advice on my first rental property purchase. The plan is to purchase this place for about 25k under value. It needs about 5k worth of repairs and a tenant in one of the 3 vacant units. After 12-18 mo. ReFi and take the equity to a new property. It should cash-flow nicely. 

I'm purchasing from a long time friend of mine. Long story short, he sold it to another person 6 yrs ago but held the papers. Fast forward to now, that owner hasn't been making the payments, so my friend is foreclosing on it and going to sell it to me for what's left on the note. In other words, I'm purchasing for about 25k below market value. It has 2 of 3 units already occupied. The third was occupied until recently, and isn't being filled bc obviously the current owner (not my friend) isn't keeping up with the property. 

The property itself needs some repairs. Part of the porch roof is falling down, and it needs new shingles on one section of the roof. Also gonna do new vinyl siding across the front. 

Here is the concern...My friend (the note holder) would like to sell it directly to me without waiting for a mortgage company. He'd just hold the note until I can secure the financing through a bank. His theory (which makes sense) is this; with the current porch roof in disrepair, as well as the vacant unit, a mortgage company will take a longer time to approve the mortgage. He suggests that I take over the property, do the necessary repairs, fill the vacant apartment....and THEN after the property is in a more favorably condition finally go through with the mortgage process. 

On paper this plan seems totally reasonable. I'm extremely confident he's not trying to scam me or anything, Our families have been close my entire life (37yrs). 

Is there anything I'm missing or should be concerned about with this approach? I'm wondering about your experiences with banks. DO they raise concerns with properties needing repair? Should I try to finance for the full value once these repairs are complete? What if I finance for the full 85-90k, will the bank cut him a check for the remainder of the 60k and then cut me a check for the difference? Will they hold funds until repairs are completed...that sort of thing. 

Here are the deets. 

Purchase at 60k. Repairs at 5k. Appraised at 85K. Taxes @ 3k. Insurance 850. Current rental income is 1400 tho potential is 1900 with third unit rented. All of the repairs slated would be road facing (fix failing porch roof, new shingles on a small section of the main roof, and new siding across the front) so the improved value could be a skosh higher than appraised value. 

[Mindy Jensen]

My immediate reaction upon reading your story is to wonder why he doesn't want to wait for bank financing. It takes about 30-45 days to finance through a bank.

You say your families have known each other forever and he'd never scam you. 

I really hope you're right. But  why can't he wait 30-45 days? He's already going to be holding the note. 

Double ditto what @Jeff Copeland  said about the title work. 

A scenario I see happening is that you buy it from him, make the repairs, then can't get the financing because the appraiser says it's worth significantly less. Now you're stuck with a property that isn't worth what you paid for it.

If you buy this without a bank loan, get an independent appraiser to give you an estimate of what it's worth. Just because there's $65k left on the original note he's been holding does not mean it's still worth that $65k.