The things that get hit most is peeling paint, roof life (needs at least 3 years), and in Utah (not sure elsewear) needing seismic straps for water heaters.

If $10k in debt has you strapped you might consider working as much as possible to pay that off and save another $10k to take a real run at investing.

The downside risk to homeowners selling in this method is real.I have seen so many boot strap investors try this scheme and they get in trouble the sellers end up filing complaints at the AG's offices.. it can be a real mess if you don't know what your doing or have the cash to pay a loan off when its called.. or carry a property that a tenant trashed and needs 10k of work plus the negative cash flow until its done and re rented.. it can easily suck 20k out of your jeans.

I would only do this if you are really strapped for making the down payment, i.e. there is no other way to do it.That said, at 20% down, the 4.875% interest sounds a little high.

That being said most, if not all of these properties either have a community washer/dryer or residents walk/drive 3 blocks to the laundry Mat.

Any changes to the building code will have to be met (earthquake straps in California but probably not Indiana).

Mat Sorensen wrote the book on "The Self Directed IRA Handbook". 

I have read a few BP threads and a few web sites on SDIRAs, as well as Mat Sorensen's 38-page pdf, "Self-Directed IRAs and Real Estate."

Almost all developers are time-strapped and are seeking capital.  

For new buyers or those cash strapped it may be needed but it also speaks to the strength of the offer.