The Roof, water tank, and HVAC are fairly new.  

If this was a 50k house and you wanted to pay 50k and the seller wanted 60k that’s a fairly substantial gap.

Always fair. 

You'd want the interest rate on the 2nd loan (Wrap Loan) to be higher than the interest you are paying the seller to ensure you are making some interest income via the spread of some kind.You can also ask for some kind of downpayment.   

I know of an investor who uses that strategy regularly and does fairly well.

Much of the cost of renovating the unit will be borne by me, and a fair amount will be now covered by insurance; the carpets have burn marks, the walls have got large brown areas, doors have been kicked in, there will be lost rent due to re-hab.

hey  fellow investors hope all is well , I am fairly new to real estate investing. as i was driving for dollars I found a lead for a house with a motivated seller.

I live in Cali so I'd prefer to avoid filing for an LLC until I'm fairly certain the deal would make sense for both parties.

If you can come to terms with a Seller, you definitely want to engage either a title company and/or a real estate lawyer to ensure the transaction is executed correctly, the deed, deed of trust and promissory note are all drawn up correctly and filed so that both parties are protected

Not even the agent knew the fair market rent.