The fire departments report determined that the fire was caused by the tenant throwing a cigarette into the trashcan, and also mentioned finding drugs on the premises. 

If none do, use the screening tools discussed to give notice to the weakest tenant.With increasing rent that much, I would let them know what will be changing (better management), throw in some upgrades (carpet or paint one room, do anything that will need to be done in the next year now, add ceiling fans, that type of thing).  

Now, if I were to hold the property as is for the full three years and just throw all of the monthly cash flow into a savings account then I would have $14,400 of the $15,000 balloon payment already in savings.

Say throwing in a $1000 referal bonus, that sort of thing?

Otherwise I would not throw good money after bad and not go after the seller. 

One of the problems we are seeing is that many wholesalers do not estimate the repair cost correctly, we have been rehabbing and flipping properties for a while and our contractors do a great job quoting reasonable prices on our properties, but none of them can match the low price that the wholesalers advertise.Another common issue is the ARV, many properties will not bring the advertised value, yes real estate is strong here in Charlotte but investors are not throwing money at any advertised property.BP is full of useful information that help estimate the repair cost of properties and assist in property valuation, listen to the podcasts and read the posts of experienced investors.When estimating repair, we do not deviate from the following:- We get quotes from reputable licensed and insured contractor.- We do not assume that investors will do the repairs themselves.- Online valuation tools do not give an accurate ARV, we consult a realtor.- Property values are going up, but we cant fix a property and hold it until prices go up...The list is much longer, I am sure many our BP readers can add to it, but these are the major hitters.

I'm just looking for a sanity check on my rational.Asking price: 495,0004 units + 1 non conformingRents + laundry: around 5300Taxes around 3000I'm taking into accountmortgageinsurancewatervacancy of 1 month a year5% maintenance.I've been throwing in 10K in repair costs (very rough guess)In the end i'm getting a market cap of about 13% and cash on cash of 60% The numbers seem really good.

So everything is going along smoothly, you have your property criteria, your analyzing your head off and finding potential deals on the 2-4 unit multi-familys you are so comfortable with now...and then...you come across a property that throws a wrench in everything.  

Trust me, this won't be the only thing that throws your numbers off - more is coming :)

The reality is a seasoned investor has many people throwing private money at them for lower rates.For a proven performer there is much less risk perceived due to experience and a track record of success.