How would you make this a formal loan - Do you just write up a simple promissory note and attach a loan amortization table to it showing what the payments will be over the 5 years. 

You may find this table useful.

It would be really awesome and helpful if you could figure out how to let users embed their BP Calculators into a post so that it's easier for everyone to communicate on the same level and with the same tool instead of having to hack together responses from our own spreadsheets especially since BP the forum doesn't allow us to post any table delinated posts.

I removed the table and some columns.07/02/2012     Relisted $565,00006/29/2012     Delisted01/03/2012     Relisted $565,00001/01/2012     Delisted08/02/2011     Relisted $565,00007/31/2011     Delisted07/08/2011     Relisted $565,00006/30/2011     Delisted06/28/2011     Price Changed $565,00012/01/2010     Relisted $615,00011/30/2010     Delisted10/11/2010     Relisted $615,00010/08/2010     Delisted09/09/2010     Relisted $615,00009/08/2010     Delisted06/27/2010     Price Changed $615,00004/09/2009     Listed $620,000

Right now I am in the process of searching for a partner who has experience in this type of project and has some financing they can bring to the table as well.  

@Nicholas Crum, how complicated was it getting the seller to the table?

Either that, or you can use some of your own capital towards 10% of the purchase price, another 10% carry-back financed by the seller, and the remaining 80% brought to the table by the bank.

However, since the seller owes $140k, this would be difficult as the seller wouldn't be able to accept the $115k offer without a short sale (approval from the bank), or bringing cash to the closing table.- Tom

If it is in bad enough shape that she can't list it, see if she will sell it at a loss and bring some money to the closing table.

Any local knowledge you can bring to the table is valuable.