Q- How is it the seller is the bad one in this situation?

So the situation you are describing is more likely to happen in DC/MD.

if the property is $100K and the rehab is $60K you'll need 10-15% down plus closing costs plus holding costs - conservatively 16-24K + 5-10K + 6-12K = 30-45K at leastand you don't want that to be all your savings... so you'd need separate savings and emergency funds - i'd want 25-50K depending on situation, lifestyle, etc.so 50-100K i guessbut that's just a horseshoes and hand grenade estimatethese types of questions are hard because we don't know much about you or your financial situation

That's the situation I find myself in.

If you don't want to deteriorate this situation, I would like to ask you to apologize for this and return my security deposit.

If anyone has any suggestions for my situation, I would really appreciate it!

In your situation, that could mean significant differences for eventual income taxes.

Everything is highly individualistic and there isn’t a “right or wrong”, but what works best for you and your situation. 1) what is your ultimate goal for your ideal investment property?

This is a very technical area and the tax issues will depend on your specific situation.  

I personally have two friends in this situation.