$40K Purchase price and $255K Rehab ($295K total) is already over the lower amount.  

If you do it the other way your refinance will be based on a lower value.

@Tarik Nabi Are you getting lower purchase price by paying cash if no why to pay double closing cost unless you can't get loan because of rehab requirment.

These offers have a purpose to outlay the following circumstances: Offer 1 – asking price with traditional financing, offer 2- offer based on NOI and local cap (what would prob be norm if they took to market), offer 3 – lower purchase price (higher than NOI/cap offer but below asking), using 97% seller financing & preferred terms (don't know what they will say unless you ask :)).Buyer Performa used for all offers:Scheduled Rent: $3,900 Tax & Ins.: $850 8% Vacancy Rate (average is 7-8%) 4% Management Expenses 10% Capx/Maintenance (I’d prefer 15% but I’m ok with this giving value add opportunities I've identified) Offer 1 – I want to show the seller what their ideal deal looks like with their asking price and how it doesn’t work with traditional financing that creates negative cashflow for buyer.Purchase Price: $400,000 Down Payment: $80,000 Loan Amount: $320,000 Loan Payment: $2,292 monthly (bank with 6% and 25year amm.)

Lower end properties are more susceptible to extended vacancy, more likely to require evictions, higher turnover costs, etc....

ROI is lower with cash. 

If there was no out-of-state money, housing prices would be lower in many of these markets.

The general rule is that the more passive the investment, the lower the return.

@Nate MorrisIt would make sense that the deal may need to be included in a separate sale.Generally when purchasing property, you want to weight more of the value into items with lower depreciable lives.

He is going to pay 10% for 6 months so that he can get a lower rate after he pays 3k or 4k in fees AND closing costs and then pay all the fees and closing costs again in 6 months??