A 1031 exchange allows you to trade up in value of properties and defer (sometimes permanently) the taxes on that sale.

Do they have some deferred maintenance that you plan to take care of when the tenants leave?

(Unless you're in an extremely expensive market)Your description of the seller makes me think there is likely a large amount of deferred maintenance.

But if the seller is looking for a way to delay a large capital gains tax bill, a seller financing, properly structure could defer the tax and provide an ongoing source of income for the seller, without the headaches and responsibility of owning the property.

My reasoning is because they are currently under market value and initially I will be doing some upkeep on the deferred maintenance of the house, putting in a security system, and cleaning up the common areas. 

Background: New REI, purchased my first investment property this past Spring- 4 unit complex (2 BR, 1 Bath, 720 sq ft each)- All expenses approx $2075/month (principle, interest, insurance, taxes, water, sewer, rainy day fund monthly addition, online tenant pay platform)- C-/D type property, slowly renovating to B class- Rents at purchase: $625, $625, $685, empty - Current Rents: $675, $675, $715, $900 I have had my share of expenses (learning opportunities) as I am doing a full renovation on a property that had a ton of deferred maintenance, but it was what I was targeting.

You should receive  their security deposit at closing which may defer some cost of rehab.

Therefore, you should look into a 1031 tax deferred exchange.  

The home has quite a bit of deferred maintenance, but is in an amazing location.I'm hoping you all can provide some advice on how to move forward.

By distressed I mean rents are significantly below market rate, deferred maintenance in the units and the exterior of the building.