If all the other houses around him are apartments, the chance of him finding a family that can afford a huge old house that is willing to live in Janesville AND near apartment buildings is pretty slim.

Uhhh I'm basically a newbie so don't listen to me, but that seems like a really slim margin that could get eaten up fast if there are unexpected, surprise costs...plus you're saying it's a conservative estimate.again, complete newbie here, never done a deal before.  

That took another year but I won that hands-down as well.The end result is that my title was clouded for five years and it cost me almost $200K in attorney's fees to get to where I could finally sell what should have been a five month flip.Should of sold it to the previous owner if he wanted it back so badly...I've always had a policy of selling it back at a slim margin if the previous owner had the liquid means.   

We just finished our first flip and considering the margins are very slim, we are considering going the FSBO route.

There's slim to none chance on getting a claim on a builder's contract/warranty.

When they approached me about this whole deal, they knew that it would be a slim chance but they wanted to ask anyway.

You might consider charging a fee, even hourly, for assistance and give some to the broker.You can certainly work investors, but they need to be able to buy, not just one deal, but 20, the thing about working with good investors is that they are repeat business, but if they have to do lease options every time of get seller financing, they are not investors for a Realtor to build a business on, those deals are slim and like your broker was saying, get something for nothing, wasting your time submitting low ball offers.

I agree with @Christopher Brainard on the deal looking slim.

Robert Herrera I agree it seems very slim that you would get in trouble for renting the first year of a FHA loan, but it is still against the contract a person signs.

Just remember to approach these people kindly and think of how you can add value to them, otherwise your odds of succeeding with them is slim to none.Just think about how you'd like to be approached by someone if you were in their shoes