You are right that the next buyer has to be able to underwrite to a profit, so all acquisitions need to carefully consider exit cap rate assumptions.  

So it does appear to be possible to get an FHA 203k loan for a 5-unit & convert to a 4-unit.When possible, aim for the Limited (aka Streamline) 203k loan, as it's less complex, not required to get an FHA consultant, etc.Of course, this is based of the two following important assumptions:1)  zoning allows for this2)  and obviously I owner occupy for at least 12 months3)  the total purchase price + renovations are within the FHA loan limits specific to my areaWhat I'm confused about is the timeline or chronological order of the process? 

Compare expected return, intrinsic value, discount rate, etc to make sure performance is acceptable given the assumptions used. 

My assumption is that it’s in probate, and will either go to the son eventually, or wind up on the auction block.

Thank you for validating my assumption.

I suggest follks stay clear of messy interconnected situations, and the worst issue(s);  assumptions and expecations within family members...Stay clean and clear of these things. 

Not because you asked them specifically to but because you talked about an adjacent issue and made assumptions based on that conversation.  

I think that's also a bold assumption.

And if they're open to loan assumption financing?

It does rely on a few assumptions, such as continued occupancy, good property management to keep that occupancy up and maintenance costs reasonable, and that the initial rehab (other than the issues I am experiencing) was of good/durable quality.