Hey Arturo,Some usual pros; Can be below market value, Can be move in ready, Some usual cons; May need tons of rehab work, Might be bid up to above market value, Might be a common foreclosure area.These are a few.

The top were mdf and whoever drilled the holes messed up the jig so the holes weren't correct.

The key lies in selecting decent properties to bid on.

The assignment assigns the Mortgage to youThe allonge transfers the note to youAs for due diligence :Are the notes Dodd Frank CompliantHow much are you investing relative to the current unpaid balance (UPB0How much are you investing relative to the current Value of the propertyAre there unpaid taxes on the propertyAre there any unpaid liens on the propertyAre the borrowers currentHave the loans been professionally serviced so you know the pay history and the correct UPBDo the borrowers pay on timehow long have the buyers been in the property, do they pay on timeAre taxes and insurance escrowedIs there insurance naming the lender is there a lenders title policy

How do I find a licensed mortgage originator to write the note correctly? 

If the offer is accepted and I'm in the option period, I need to find a home inspector and I need a contractor to make a bid.

That said, based on the info provided, and being in So Cal myself, I would replace them all, reframe the Arch out to rectangle keeping the largest opening for light and view purposes, and get a bid on several window manufacturers for best pricing.Design and quality of your finishes will play a big role in your exit value.

I usually use 8.33 (1 month in twelve) as a benchmark when analysing a property.Given your numbers, I am also presuming that the tenants pay their own heat/utilities (save water).This will give you and operating ratio between 43.5% and 49% (which may still be light, but could be correct if tenants are carrying their own utilities)This will leave you with NOI between $3200 and $2900/mth.  

I can also walk away with no loss if he doesnt accept to bring it down, correct?

I would like for the community to be able to identify me as a lender and find me in the correct places.