If I had to guess, prices will keep rising to extremes for a while yet and then suffer a decades permanent long decline aka mean reversion.

Owning rentals or doing fix and flips without a good CPA is an extremely bad idea.

So before you decide anything, make sure you run the real numbers (versus using a guideline) and confirm what you expect to see for returns.Secondly...my only caution is if the property barely cash-flowing (not saying that's what will happen, but if it really is a barely)...there is an additional risk in CA in owning rental properties which is the extreme tenant-friendly laws here.

But now I'm extremely nervous because he offered me $205,000 but he(or his company) doesn't intend on purchasing it.

From ones I have seen, they border on predatory lending and have extremely high interest rates.

There are some extremely AWESOME people from the Shreveport/Bossier area on Bigger Pockets.

I do not want to invest in property here in NY because I know it is extremely expensive.

The inverse to that is that financing is extremely easy to find right now compared to a few years ago.

Stepping out of place as a lender can send you to prison in extreme operations but at the least you can lose your note, collateral and money (usually you'll have a fine as well). 

(The bank is not going to just sell it at a loss to the first person who talked to the seller - they want it exposed to the market to get maximum value out of the sale).That being said, both of the above options are a real pain to deal with, and the odds are extremely long that the bank will sell to you at a significant discount.Here in Florida (even after #2 is complete), the short sale addendum to our contract allows the bank up to 90 days to review an offer.So, what typically happens is:1.