Remember that most lenders will not finance a $20k property.Something does not sound right to me and the sellers flexibility seems he just wants to get rid of it.

I subsequently refinanced w/ a conventional loan to get rid of the PMI.  

Up here in the north, we heat with oil and landlords even bill back the tenant's share of heating expense.We got rid of the RUBS company and now just bill the tenants ourselves. 

So, you can elect to get rid of a good paying tenant because of a smoke problem or let her stay and when she goes you would/should have made more than enough money to offset the repair costs.

However, I can not refinance the house for 6-months (house value purchase price for 6 months), but after that my lender is going to let me refinance to A) get rid of PMI & potentially B) use equity in house as a basis for getting a rental going – years ahead of schedule.So here’s where I humbly ask the BP community for assistance.  

I really need to add some of the worst pics of this house...many people have commented on it not being that bad, it was worst then the pics show, its by far not the worst at all that I have seen.A lot of people stay away from hoarder houses because of the cost to get rid of all the stuff, you usually have to kilz the floor, remove a lot of sheet rock, and because there is so much crap (literally at times) that you cant see all the hidden issue potentials.I have posted on craigslist ads with some success, I also network a lot and ask for referrals all the time when looking for more contractors.A lot of the house was junk, but one of the reasons I liked this hoarder house was that they had a lot of new stuff as well hidden. 

You'll have to live it in a year and then you'll want to refinance to a conventional loan to get rid of the mortgage insurance premium (MIP), so just buy right so it'll appraise at 80% LTV when you try to refinance after a year.

Forced-air gas does let you have central A/C if you want it... maybe that lets you get rid of a window unit that's in an awkward spot or noisy or whatever.In 2009 there were some federal tax rebates for more efficient HVAC (or more insulation, better windows, etc) but I don't know if those are still available... the furnace salesman should know all about them. 

If you think you want to get rid of one eventually, it may make that a process a little more intricate.

You can use the low down-payment FHA to get in the door and within the next five years you can refinance into a conventional loan if you have to, or use a conventional 5% down and as soon as the equity grows to 22%, you order a new appraiser and you'll get rid of the PMI.I bought a property where after a bit over a year I have the required equity to get rid of the PMI.