Here are the stats:Summerville, SC, 1790 sq ft, built in 2001, asking between $200-$220k (seems about right as Zillow says the price would be about $202k)Has not been updated at all except for a new water heater.  

If it is set up that the client receives membership interest or shares in an entity that owns real estate then that would not qualify.The exception (sort of) to this are specifically syndicated products that are sold as securities and set up so that client does receive a tenant in common interest in the underlying real estate asset.  

This way he has to do very little except cut the check, sign the paperwork for the mortgage (issued from him to the LLC) and cash a check once a month.

I'm talking about buying the house at a discount, and renting it to him for about what he pays now for a mortgage.. except this way he will walk away with $50,000 to pay off bills and maybe take a trip.., we would be doing him a favor, but I would also be getting a great deal on a house we could later rehab ( causing forced equity) and rent ( cash flow).. yay?

Some exceptions could be tax liens, municipal liens and whatever liens in your jurisdiction have Super priority over first lien mortgages.

There is not much appreciation going on except in a few small pockets.

I always told new agents comign to work for me you need to save up 1 years of livings expenses... it will take you that long to get your income coming in a consistent way.. or you need to keep your job and do this part time until you grow into it.those that quite thinking instant success in what is a VERY VERY tough business usually went broke and were out of the game in a matter of months.Think about it like your starting any other kind of small business.. you need capital in the bank you need capital to run the business and you need capital to live on while you are priming the pump.You also need exceptional sales skills and should spend money learning how to sell and close.you need to understand this is 24/7 ... if your going to beat your competition to the deals.And remember there are simply WAY more wholesalers and wanna bee wholesalers than there are deals in MOST markets.. 

So They hold no value except that value which you'd like to assign to it, but yes this exists. 

Also consider asking the bank to have their internal people review the appraisal and see if they can make an exception or change that opinion.

I've done all of that except for calling the city inspector.