Be careful with leases longer than 1 year, some states have special rules you must follow it your lease exceeds a year and 1 day, also we would make the lease till march-may/june, then a year after that. rents will depend on market conditions, I prefer my rents be at or just below market, with the hope of keeping the tenant longer, Turns are expensive, so lets say rent is $600/mo and you have a 1 mo vacancy because you are $25/mo higher than the place down the road, it would take 2 years to recoup that lost months rent, I am all for keeping units full even if that means a little lower rent, maybe a $5-$10 bump is ok, but dont push it. 

He's doing #1.With that being said I believe that getting into a property and building equity, tax incentives, debt pay down, etc for the next year years will far exceed sitting around for 3-4 years saving up and then purchasing something.

John is correct, on these types of properties capex can exceed cash flow over time, so you are looking at a net loss.

The next investor has his own GC crunched his numbers and ending up passing on the same deal for his remodel costs were $70k+ exceeding the ARV.  

If they sell the house, their mortgage to the previous owner must be paid off to remove the mortgage lien on the property.So, as long as the value of the property exceeds the debt on the property, they have equity and can sell or refinance and pay off the original seller-financed mortgage. 

TLDR; Potential 203(k) deal didn't work because total costs were going to exceed my projected ARV and rents.

The only thing that will have me back out is that, if they accept the offer and i inspect the house and get initial estimate from contractor that exceed what my repair cost will be, then i probably will back out.

If your 1031 monies exceed the 10%, I recommend using every dime of that to make your purchase. 

I would ask your mentor what you can do to help, and whatever he asks you to do, no matter how seemingly trivial, do it exceedingly well and knock it out of the park.

The benefits far exceed the $900/mo cash flow.