If necessary, build in a "base plus bonus" structure for him in case things go south for some reason...market tanks, etc. 

Sure, it would be a nice bonus to be getting that out of property that is also likely to appreciate at the same rate CA has seen over the last 5 years.But that's why Einar is going back to the drawing board and asking the question.ie. it's too darned hard to get BOTH happening with the same investment, from day one!

If you put in any new tenant improvements most of that would qualify for 5, 7 or 15 year treatment as well as 50% bonus depreciation. 

Here is a bonus rule.

I think what I will do is offer some sort of % bonus (e.g. 10% to 30% of profit) to the contractor...... as long as the deal is profitable.

Long term appreciation is a great bonus!

If I do ever get paid it'll just be a bonus.

Thanks Mike LaCavaI follow Robert Kiyosakis' idea that if you buy for cash flow, then it dosnt matter what the housing market dose. if it drops you still have cash flow coming in. if it increases, then that's just a bonus.

I should also be able to accelerate paying off the 401K loan in Nov with my annual bonus (not a guarantee but pretty darn close).What I'm wrestling with is, do I take the short term crunch on cash flow (anywhere from 6mos to 2 years) in order to get into this deal.

It is also clear that the owner of the house was disabled (wheelchair) and it appears they didn't enter or utilize the rest of the house.Bed 4/Bonus Room 9x9 (sheetrock, paint, carpet)Kitchen 2 7x12 (strip, remodel to a mudroom/other area)Stairs (refinish wood/paint, or carpet)Bedroom 3 and 4 12x12 (wallpaper removed, paint, carpet)Upstairs Hall (Paint, sheetrock)Bonus Room 2 (Cosmetics)Bonus Room 3 and 4 (Light Cosmetics)The kitchen is the first room, this is in need of purgo or hardwood flooring and a full overhaul.