I can't imagine that things haven't changed since this initial post 2 years ago, but they also must be getting these calls constantly.

I'm currently in the initial phases of talking with the owner, but here is what I know so far:Rents are about half of market...owner is aware of this.  

Do I change the name of the landlord and have the tenants initial and me signing at the end, or do I create a new lease?

We performed nearly $15,000 in repairs on this one and had it leased within 2 weeks of completion.Rented for $800 a month and Sold to a very happy investor for $70,000.Our Trust Deed Investor received an 11% return in less than 6 months and our Cash Flow investor purchased a great, renovated property with equity with an initial 10% return.

I'm curious to know why you assume 10% for repairs/capex when you're also assuming a $5K rehab initially?

Your initial post was pretty dramatic. 

Account ClosedThank you for the advice I will check out at least 3 meetings.I think I left out in my initial post that my profession is construction and I already have a large network of subs and can estimate the costs of rehabs.  

And it can work both ways, for example in some cases the BPO is inaccurate and the property is worth even more than the bank initially thought.

If the risk of a lender initiating its DOS clause and is of paramount concern in a Sub 2 then there are other methods to mitigate this risk.I've bought property using a land contract of sale, that in itself has a lot of similar risks of a Sub 2 transaction remaining unrecorded, and have been researching Sub 2 transactions.

Give Ben Leybovich's blog post here a read, but even more so, read Brian Burkes comments on the blog.Your CAPEx reserve is not an operating expense, it is a reserve and is deducted from NOI.Instead of looking for a specific CAP rate which will get you in trouble, you should be carrying out a discounted cash flow analysis over your {initial} hold period and determine the IRR or MIRR ... use these to anchor your underwriting, then look at things like Cash-on-Cash return to help determine the composition (some might say, quality) of the return.Frank Gallnelli's "What Every Real Estate Investor Needs to Know About Cash Flow" is a good primer to get you started.