I can barely get paint and carpet and cleaning done for these amounts.But I would think that even a pretty minimal rehab would be higher than what both estimated...and with the slim margins, I dont see a property worth buying here.

If there is insufficient funds to payoff both liens, and Seller cannot raise additional funds, IMO, the only CLEAN option is for Seller to do a "Short Sale". 

It will clean up existing scale in the system.

I do JVs like this all the time (Just completed my 5th).Send me a DM and I can provide some details (little easier than by msg)

We would rather clean it ourselves rather than hiring cleaners to come in to and just charge them for our time to clean the house. 

For me, probably.If you're toward the $325K price, I think this decision becomes MUCH easier for me.I'm curious what is causing you to hesitate with waiting?

Harder to find a motivated seller willing to sell at a discount or creatively than to find any old seller and easier to find any buyer than one that can buy at a big discount for cash or with creative terms. 

It's easier to keep track and ensure you don't spend it.

I would probably make it an addendum to the original Lease agreementIf he can qualify on his own then I would continue to rent to him but just clean up the paperwork.

.," I have in mind the kinds of things Jon is mentioning--turnover costs, cleaning fees after turnover, tax and legal help, lawn care.