However, a city like Dallas has oil exposure but real estate values continue to grow because there are numerous other economic drivers in its diverse economy.I also agree with your view on conservative underwriting.

Originally posted by @Amr Omar:Looks like this noob is mixing up Cap Rate with Cash-on-Cash ROI :/ Cash-on-Cash ROI: (500x12) / (15k + 6k + 2.5k) = 25.5% Purchase Cap: (500x12) / 170k = 3.5%  Wouldn't cap rate NOT include P&I in the numerator?

Be prepared for numerous requests for documents.After the property settles and becomes yours you have 6 months to finish the property.  

These are all key elements of being in business and being part of a team, but by no means is this a complete list.My $0.02 ...David J Dachtera"Success is not a destination.

I have developed relationships with numerous local lenders and banking executives in the Baton Rouge area by doing exactly what you are doing.  

Option 1 drives up holding costs, but Option 2 seems to place a negative element in the listing, so I  am very interested in how experienced rehabbers deal with this.

it is an amazing resource.If you ever want to tag someone in a post (like I did for you) to alert them of your response just type @ then start typing their name and it eventually a box will pop up by the @ for you to click.The podcasts are AWESOME and the site also has  in-depth guides for new investors and their are so many beneficial blog posts as well too numerous to mention.  

Jonathan Johnson , I think you could use some serious help from a more experienced investor who understands what to look for in a deal like this.You should consider finding a partner or selling this opportunity to them for a nice profit.There is no reason for you to see the apts unless you have a contractor with you who can show you all the numerous problems your inexperienced eyes may and probably are missing and exactly how much it will cost to repair the damage and decorate the property to modern standards.You are very lucky to have a potential seller with a fully paid off property because there is no bank loan to satisfy.You will be able to get a better price if they know they get to keep all the money and not pay off loans and real estate commissions.

The options for financing are numerous – do I need to lock down more clarity on where my money is coming from before I spin my wheels finding a deal?

Do you report some discount element as short term capital gain, or just as interest ?