I'd assume it would be the latter since most lenders are going to already discount the Gross Proceeds 25-30% as part of their calculation.Sorry to put you on the spot because I can probably ask a lender this question but figure you may know if you're already using the BRRRR strategy.

If you can't get a better discount on the property where you would win with the current rental rates, I'd pass.

I think people nowadays just have to be a little more proactive or aggressive maybe and go find those distressed sellers that are looking to sell quickly which ultimately means you getting a discounted property.

Lastly same question but for the bathroom,  I've cut out all the mold, what do you think I should do next to ensure I kill all the mold 

The hoa did what was best for them, as the bank and buyer in the short sale were likely offering only a discounted pay off.  

The house has been fully redone: kitchens, bathrooms, roof, Windows, HVAC, etc.Sale price: $195,000 ($175,000 cash, $20,000 paid interest free over 5 years to the estate)Expected to appraise at between $205,000 and $210,000Taxes: $2,500    Insurance: $1,300Total rental income: $1,750My father will be financing the $175,000 cash for a fee of $5,000 Closing costs: $3,000   Transfer tax: $3,750   Property tax reimbursement to seller: $1250The max financing I can find is 80% LTV.

The real kicker is, when renting the home, everything is outside; bathroom trailers, food, etc. nobody really steps for inside the home, and the owner gets between $4,000 and $8,000 every event.

You might wan to look at the tax assessed value and give a discount (Make sure you put that in your description when selling.  

@Brendan Griffin A lease and a simple option to buy at a 20K discount, 20K paid for option should do it.Use a CT lawyer.

With the prior rule (prior to the 25% discount) you could buy properties with lower rent to value ratios and still get past underwriting.