The main sticking point is that I will need some sort of creative financing to get the down payment. 

I think I at least have a small capital loss on the deficit to principal but perhaps a larger capital loss if I can write off the agreed interest income that I didn't receive?? 

They tend to only be a good strategy for a very sort after property. 

Is this violating any sort of securities laws?

Any realtors that have experience with this sort of thing.

Anyone have tips on how to put together some sort of packet to bring to him so that he knows this is a legit option and to help him see the benefits of this?

A higher appraisal doesn’t help you get a larger loan.2) the appraisal is good for Only this purchase transaction, not for later refi’s.

Should I purchase it for cash and finance it later (does this give me some sort of flexibility, cheaper financing option later on?).

Most lenders want some experience or a larger down pmt which they should.

You would handle the easy ridge and top panels in the fall of the first year, they would handle the awful side work in the spring of the second year, and it gets written off in two years.All sorts of enterprising tax scenarios become possible.