@Patrick SoukupGood question.My 50% ratio is used simply for a down and dirty quick assessment of a property to see if it is worth diving into at a deeper level.In addition to the expenses you list:There are often utility costs, landscaping costs, advertising costs, administrative and accounting costs, legal fees, unit turn costs, probably forgetting a few, etc - so they all add up.

Below are the details, we are looking for a way for both of us to win in this if possible.The assessment is $180kHe wants to walk away with $160kHe owes $50k on itHe wants $50k in the near future but doesnt need the full amount right away and would rather save the taxes There needs to be $30k in remodel prior to renting again Rents will be $1.6k/mth which will cashflow slightly given conservative numbersI am a contractor and my thoughts were the following but feel there's some holes that need filling in.I would take over his monthly payments while the rehab is being done.I can cover the rehab costs out of pocket.I get it rented and then go to the bank to finance it.What I'm not clear on is the best options at this point.If he doesn't need the full amount immediately is he/I better with him holding the note from a gains perspective?

I don't disagree with your assessment.

I explained why my Risk assessment of this investment was off the charts. 

Run the numbers once (or twice) more to make sure there aren't any little "gotchas" hidden in your initial assessment.

- How were you able to assess the property (check for red flags, possible approaching large expenses, etc) , given you are deployed in Hawaii but investing on Virginia?

Also be careful because if your tenant doesn't pay HOA, it can be assessed to your property so you will end up paying it anyways.

That's no assessment of you, that's from personal experience as a professional, examining the DIYed 1065 returns of many prospects who come to me.My firm, as a general rule, now only accepts established 1065 clients if they are coming from another CPA firm and have solid bookkeeping -- P&L, balance sheet, and general ledger. 

I was really hoping that the city would use it's own assessments and sell these properties for much less than market value. 

If I wanted someone to look at the property to assess the water damage, and the likeliness that it would happen again, who would that be?