If it were me, I'd buy the note with contract of sale for no out of pocket cash to noteholder and push all possible risks onto them, using my skills to foreclose, clear title, capitalize, repair and prepaid for retail resale.To sweeten pot, offer listing to him if he's halfway competent agent (have my doubts). 

A cash-out refinance within six (6) months of a purchase transaction when no financing was obtained for the purchase transaction are allowed under the following parameters: The new loan amount is not more than the actual documented amount of the borrower’s initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV).FOR AN INVESTMENT FIXED RATE CONVENTIONAL MORTGAGE; 1.

@Mike McGeeI know that they don't accept pre-paid or stolen card information.

Where I used to live the washers and dryers were operated using a laundry card, much like a prepaid credit card.  

That would allow you to look at duplex houses up to $77.2k (not including prepaids).  

Usually lenders want anywhere from 3 - 6 months of real estate taxes and liability insurance prepaid and in the escrow account.  

Typical costs from contract to close would be InspectionAppraisalInsuranceAttorney FeesLender DepositsUtility DepositsContractor Bids in some casesYou can generally calculate closing costs as a percentage of the sale price when you settle up on the deal...and this is all relative to where you are, lender requirements, etc...you may have pre-paids or mortgage insurance....property taxes, etc, etc. 

In a nutshell.Purchase Price 90,000Interest Rate 5.5%Down payment 20% 18,000Closing Cost 7,446 (includes prepaid taxes, insurance for 1 year, appraisal, loan fees)Inspection 600 (includes home inspection, camera scoping and cleaning the sewer line)Property Management fee 1100Rent Cert 250Misc repairs 1000Total Invested 28,396Projected rent 1100/monthProjected cash flow 188.19/month for a 7.95% CoC RoI (this is after all expenses like PM fees, Insurance, Taxes, mortgage and vacancy, maintenance, Cap Ex at 5% for each)I know it's not a home run but for my first property to get into and prove to the people I work with that I'm serious about investing I am OK with the outcome. 

I think the difference was prepaid a we’re 1k higher and they are identical properties so to speak.

They had dropped the price a few times and I ended up getting my closing costs and prepaids covered and and bought the home for $75,000.