"Preferred return" implies an equity stake in the deal, yet you indicate that he's looking for a loan...

Your analysis seems to infer that these properties cannot be profitable, which I find surprising.Your additional statement of 160 units potenitally being profitable further implies that there is a deviation (+ and -) from 126 in which income exceeds (more units) or expenses decrease (less units) enough to where the math does make sense. 

So far in this thread, you've accused dishonesty and implied intentional fraud.

I think I should write an article :) Interesting thoughts, Ben.In your example above, you are implying that the "investor" is the one performing the value add, CapEx improvements, etc.

If it is still zoned single family, your single families are your comps.Per Wenda's response, which can give a good idea, assuming finishes are comparable to the single family comps, I believe the buffer he is implying is a reduction to your value, not an increase of 10-15%.  

The recent changes that have been implied on banks have made me a bit hesitant and I am not sure what would my best option be.Here are the details of the project.Purchase price 107,500ARV: 180,000Est.

It is much harder than the gurus teaching it imply.

Selling to a flipper implies that there is a better bid in the market place as flipping implies little to no value add to the asset.You are not the first or last person to have relations with potential sellers of loans.

This does not imply that LL is not required to fix the issue quickly.

As the name implies, it is a great color for a variety of rooms / applications. http://www.sherwin-williams.com/homeowners/color/find-and-explore-colors/paint-colors-by-family/SW6072-versatile-gray/ (Also a fan of "Softer Tan" mentioned by Steve B.)