The place needed work when we bought it, nothing too major it was built in 2001, but the former owners took not only the appliances but all the lighting too.

Assuming you're both ready to close, that means the seller is seeing the light at the end of the tunnel and looking forward to getting his check.

In reality, in areas of historical high demand, that demand continues for many reasons (healthy local economy with a broad based job market, natural beauty, good schools, medical care, etc.) with demand comes higher prices.

Other expenses: flooring, mudding, texturing, light fixtures, doors?

Maybe they meditate or pray or spent some quiet time - in a forest, by a lake, or some other place out in nature - trying to find and listen to an inner voice, etc.That's all fine - but don't spend a lot of time on it.  

Especially if you purchase close to the light rail, I think it would be a fantastic investment. 

If the IRA owner provides any “sweat equity” activities – even something as minor as changing a light bulb — there could be significant penalties."

Home Depot has everything you need; Investor tan paint, kitchen cabinets, light fixtures, Decora outlets and switches, Pergo laminate flooring, Berber carpet, 6 panel doors, light fixtures and ceiling fans, etc.

few understand the true nature real estate (non- commercial).

Definitely find a few photographers who specialize in real estate.Don't just go with someone who does weddings, nature, etc.