That was the worst time to buy a home in one of the core Bay Area markets, because it was right before the Great Recession, so they should be doing utterly horribly in terms of home value, right?

If they make $7-9k per month and all the cash they have saved is $3000 with NO housing expense, that is horrible! 

It's all about smart buying, and exactly that point is why 80% of properties make horrible rental properties- the expenses don't get covered.

From a cash flow point of view, it's horrible.

Another house had zero interior pictures on the MLS - it was horribly outdated, and the new owner has put in at least $100,000 in upgrades so it, too was underpriced.

With the new flood insurance act that just went in place Oct 1, the news is full of horrible flood insurance premium stories, so nice to hear a positive one!

Please take note that for the next 2-4 years the only thing you will get is $2500- the 20% on the back is only when the house sells in 2-4 years at which time it will probably need to be renovated again and you have no idea if he will sell in 2-4 years.I think you have better luck finding a rental getting a mortgage and renting it out, having a run of tenants then eventually selling the house- At least then you will get the monthly cash flow till you sell instead of $2500 upfront and future money in 2-4 years assuming he doesn't ruin your credit during that time.Sorry that I sound so horrible maybe I need coffee.

He had a little dog that would relieve himself in the house, and the kitchen looked like a dozen science projects gone horribly wrong.

I can't tell you how many times I've been able to buy a house for less or saw them listed and walked because some garbage contractor that was probably found for pennies on the dollar (or a homeowner DIY job) did absolutely horrible--sometimes unsafe--work in a house.

She does horrible work.