Thanks so much to everyone for your responses! Some really good takeaways here - whether it be doing some quick fixes and flipping it to an experienced investor interested in the cashflows, trying to wholesale it, or biting the bullet on the down payment or doing our best to negotiate back as much as we can.
To address a couple of points you guys mentioned:
First off, regarding the down payment. The money is held in escrow so I guess we would be able to pull the maneuver of refusing to sign the escrow release and negotiate down. However, we have gotten the chance to speak with the owner about this one - we pretty much begged for him to let us off the hook and he was willing to go and try to find another buyer. He is still searching as I write this and we do not expect much to come from his searches, but the point is, he was willing to help us out and we appreciate that. So, instead of refusing to sign the escrow release, we would maybe just ask if he could cut us a break and cut our losses if not.
However, before we do that we are going to try and wholesale this one. We have built a relationship with a great realtor in the area who is currently working to find us a buyer. Hopefully, we can not only get this one off our hands, but make a little cash on the back end.
A question I do have is regarding the taxes on returns for a flip. Maybe I'm missing something, but wouldn't a 1031 exchange allow us to fully invest our gains and not have to pay taxes?
Second, regarding the rehab cost, I put the $40-70K range because we are at this point unsure if we would use the unlicensed contractor or a licensed and insured one. Of course, it is heavily encouraged to have your contractor be insured. We are currently trying to work around this one by having him pull out a policy for the project. If we were to use the unlicensed contractor, he could do the work for around $40K, maybe a little over. $70K is based on one high-level estimate I got from a licensed contractor. So in other words, it depends. But yes, I agree we should hammer down a more accurate scope of work.
Again, thank you for all your comments. We will definitely let you all know what happens with this one. Fingers crossed!
Jake