That's to protect the investment and ensure one random event doesn't implode the whole deal.Then I look to do lower cost (to me) but high effect (to a tenant) items, paint, flooring, appliances, new gravel on a driveway...A few years into it, even if values in that neighborhood have also grown by then I should have a house above the mean rather than below. 

I want to get into buy/holds in the lower 48.

@Ben LodAll of this could happen and then what, will you then want to wait for rates to go to 10 from 8 to try to get lower prices? 

I would also like to move back into the lower 48 before investing my efforts into property.

And I am probably on the lower end on both of those numbers from most big time flippers.Ways to make this work:-drop your offer by $5k or tell them you will pay $82k if they carry finanincing for the project with an interest only loan at 10% (will net save you $4,000)-get at least 2 more quotes on your rehab (may save may not)-if this is an mls property, ask the agent you are using to buy if they would be willing to list the property for 2% because they will make 3% at the sale and more on the back end (will save you $1,300)This will move your profit up to roughly $13k which is a little bit better but still cutting it close.

I tried to make a lower offer, but it seems the agent/friend is driving the deal, so can't really speak to the seller directly.

Traditionally banks loan on appraised or purchase, whichever is lower...you may be describing a hard money lender...that's a different ballgame altogether...It's impossible (in 99.999%) of all real estate acquisitions to use financing and acquire a property with no money out of pocket...best you could do is HML if you're flipping this...you may scrape by with points and fees...If you're using HML you will have to sell the property or settle the debt with a re-finance...re-fi's are typically 70% LTV...and completely dependent upon your personal financial situation, DTI...easy to get burned if you don't have capacity or the value is not there...and this is an expensive asset.A conventional lender can't lend if seller financing is involved...lending constraints...

List price just lowered $359,500. 

So if you purchase and rehab below X% then you will not have anything out of pocket...I mean, you'll have closing costs and whatever...but it will be lower than the conventional option which will require 15% down no matter what. 

@Anthony Wick That makes sense, refinance with a bank to lower interest and do a 30 year?