I would like to have some extra margin of safety since Houston rents are likely to go down over the next 1-2 years.Cameron - Since you are from Houston area, are my expense estimates reasonable?  

Here is a part of the letter, I sent to the seller:The home inspection was completed on September 29th (please see attached) and the following issues were pointed out: 1.The wooden floor frame in the middle unit is deteriorating due to either prior water leak in the bathroom or due to moisture infiltration through the walls and foundation.2.There is evidence of significant settlement under the middle unit bathroom and north closet.3.The settlement of the floor and walls has also resulted in settlement of the roof frame above this area, ceiling shows cracks.4.There is an obvious depression on the roof – water is ponding on the roof above the middle unit, which adds excessive weight on the roof and potential for leaks.5.Asbestos containing material has been found.6.The current bedroom heat installations in the north and south units pose a safety hazard from carbon monoxide, fire and oxygen depletion.7.An electrician performing upgrades did not use ‘arc fault breakers’ in the north and south unit breaker panels, which is required by the national electrical code.8.Upgrades to the electrical system, promised by a real estate agent, have not been completed yet.

And periodic inspections, and posted license details, and conform to regulations for safety, etc, etc.

Safety come with a price the same as taking financial risks or being on welfare.

I'm pretty sure I could research and find the correct/safe/legal (as you all seem to put it) manner in which to remove/dispose of these potentially hazardous materials along with the right chemical/cleaning agent to pressure wash any meth residue from the structure's skeleton...With all that said, it doesn't seem like much fun and I think I will pass on this deal, and by the way I would be giving the same advice as everyone here if some anonymous "investor" asked about this online... so I appreciate the words of wisdom.The thing that isn't clear to me is: would I, or would I not be breaking the law by continuing with my "plan"?

If your debt is being paid at a high rate, your best investment probably would be to pay that down, not even considering other factors like stress, credit score, or safety reserve should something with REI go wrong.With that being said, if you can find a great deal, your expected return on that might be significantly better than your student loan costs, and therefore it would be prudent to jump at such an opportunity.Good luck!

Give yourself a built-in margin of safety for every offer.  

@Dion DePaoli  f IRS redeems  then I think they have to make you whole plus statuary interest which I was thinking was 9%... but any improvements you do to the home past any that are for health and safety of the home would not be reimbursed.I have bought quite a few at the court house steps over the years with IRS liens I liked them actually because 99% of bidders won't bid on them because they cant backfill right away with their LOC or HML... this lead to some pretty spectacular deals in the day. 

The types of tenants who would pay more rent to live in an A building won't put up with the crime and safety issues of a C- 'hood.

And that asbestos is bad stuff- for your own health and safety, I would deal with it first.