So if I place the highest bid at an auction and they have said yes, you have won, then do I directly go to pay for this deal in all cash?

A lot of contractors struggle with cash flow, and he may have underbid the job.

FHA is 3.5% down but anything over a 2 unit requires a cash flow test, with rates where they are I hardly ever see anything in Chicago that would work. 

Yesterday I just got with the sellers of this 4 bed, 2 bath house in Kilgore, Texas (close to Tyler) and I am looking at selling it to a cash investor to make a potential profit.

Purchase price: $330,000 Cash invested: $20,000 Sale price: $399,000 Contributors: Peter Vekselman Partner Driven, in collaboration with Seth Choate, successfully completed a fix-and-flip on Tip Top Road, Mariposa, CA.

It would never appreciate to where it would be worthwhile and great cash flows on paper but not gonna happenI would bet this is common in many of these other urban low priced areas.

I have a friend that I just taught amortization to as he is trying to quickly pay off his mother's FHA loan to remove a co-signer, then cash out refi (yes, I explained interest rates right now).

Essentially you are plugging in all of your data and they are using market price studied to generate your deductions.

For example, let's say you figure out you have $250k to put towards this project and you want a cash-on-cash return of 15%.

It sounds like this person is essentially a general contractor or do you already have that role...in your case I would think your project manager would manage the GC (i.e, make sure they are on schedule, under budget, and quality is up to par).