In this case he has used leverage in numerous cases including his insurance company (financing your investments with float is leverage though very low cost leverage), options and more.

You must have tried to buy that in appreciation.Given income at 100% occupancy is 25,200 a year and with 50% costs.10% property management30% Operating and expenses10% vacancy lossYou are at 126,000 sales price and you said your property doesn't average fully rented just sometimes.You will have to float it for awhile or do a loan workout or cut elsewhere or just let it foreclose.You can try to short sell it as well.What does your credit look like now??

As the payback date floats later and later the likelihood of getting paid back decreases.

The situation is such that the current owner is floating between being under water and 100% leveraged.

I would also want to verify how long these people have been tenants, as it is possible to "pack" a rental house with friends/family and pay the rent on their behalf so that it appears that the place is a successful rental - then, suddenly, when you close, the tenants float off into never never land. 

In 2023, they don't see the same risk now, residential mortgage delinquency has just entered a new low this month alone.In 2023, the problem only lies in selected regional office/banking sector that has huge liability ratio between their cash and bond/loan  portfolio ratio and also in CMBS market due to floating rate(expected).

I know it sucks, especially when just getting going in REI but you must remember and keep in mind what would it mean, how far would it set you back, if you got into it and those worst-case scenarios happen and you can't float it, how much destruction and years will be lost from that failing vs passing it up and spending weeks/months to find/get into a deal that does work. 

Long term SFR to mid market multifamilies are projected to float around sub 4 caps for the next little while.  

If he floats both labor and materials at cost, and then the investor cant move the property untill 180 days past projection, what then.

Don't walk away - run.For that amount of money (assuming 1st / Last / SD) and $250 floating repair fee, I'd go straight to the bank and get pre-qualified for a home loan, and hit up your favorite local Realtor on the way back.