Purchase price: $40,000 Cash invested: $25,000 Sale price: $95,000 I originally purchased this home as a rental.

Sounds like they are telling you they aren't really for sale, unless you want to overpay.I get this all the time from wholesalers on some of my properties. 

@Carmen LewisOnly get your license if you plan to do sales.

However; in my experience, I have not seen many of them have B class properties for sale.

My math told me a quick sale at $400k would net me within $5-15k of what I'd net doing a master suite addition if values continued to trend flat/down. 

I figured it out pretty quickly, as the house the person was trying to rent was actually for sale by the actual owner.  

@Erik PedersenForeclosure process: notice of default -> trustee sale or foreclosure judgement for mortgages -> auction.

People elect to be taxed as S Corp to save on self employment taxes, but rental income are inherently not subject to SE tax, thus S election is not needed.S Corp also complicates the transaction if you ever want to sale. 

@Ezekiel Cruz - If you talk to a local real estate agent, they can set you up with MLS access, which will give you the most accurate information on properties available for sale.

I know theres the due on sale clause.