The seller later lowered the price to $60K, he subsequently offered $40K and it was accepted.

Taking your $2500 quote and using 4 labor guys 1 day for a total of 32 man hours to arrive at your $80 per hour ($78.13 per hour actually), you failed to factor the cost of the dumpster rental and subsequent dump fees.

@Mikhail LoshkarevYou could get a hard money loan for the initial purchase and rehab and then employ a portfolio loan with no seasoning for your exit strategy and subsequent long term hold.  

I like 5%, but it will provide you with 24 years of headache-free cash flow at 6%, fully assumable to a subsequent buyer.

Your lease probably already addresses the subsequent terms after the first term expires.  

I will talk more about funding in my subsequent posts but what about you:What FUNDING source(s) do you find most helpful in today's market to get "too many deals"?

So that will increase your 'return' in year one of that investment, but not in subsequent years.

And by the way, subsequent to this experience I signed property management agreements with a couple of foreign investors who own rental properties in Houston.Their American business entities are set up exactly as the attorney described, and I have an agency relationship with their entities.

Not sure how I'd investigate any unfiled liens, but it would seem to me if it was unfiled how would they have any success going after a subsequent owner?

I would ask a down payment of $300,000 followed by subsequent payments appropriate to the degree of completion of the house.