Remember that FHA mortgages have very stringent requirements for condition of the property, and its possible the current owner has gone through the inspection process and found that the property is lacking in certain areas, perhaps in items that the owner is unwilling to remedy prior to sale.Last note: you wrote that the owner specified it would NOT be able to be an owner-occupied purchase... was the property fully rented with leases in place?

I have ran the numbers on BP and although it is a loss for approximately 2 years the ROI I think will be a min. of 50% closer to 90% or higher depending on what it goes for at auction.  

Countertops, and other interior items could have a payoff if the area demands higher rents for premium features.  

From all my reading/listening to the BP podcast/your guidance above/my own common sense, the biggest item boils down to making sure something is in writing, and I fully intend to make sure all ducks are in a row and written down as a landlord!

The $300K profit is tempting but the hassles, aggravation and potential for loss might keep me awake at night.

Having been a high volume REO agent in the past I can concur there are many details involved that must be transacted properly on both sides of the transaction in order for the seller to substantiate taking what is more often than not a serious loss of capital.  

I listed that as my third one because it leads to most of the big expenses including vacancy, rent loss, and turnover.Most landlords already have a good lease, they just don't enforce it.

This is in Richmond, VAI have already paid a deposit of $1000 on this property but after running the numbers through the calculator on BP and accounting for 10% vacancy, 15% Repair & Cap EX COMBINED and paying for water at $50 this property comes in at 6%-8% cap rate and it seems like it has the potential to be a money pit or at least no returns.My question is am I being overly cautious or should I cut my losses on this one and back out of the deal?

I'm hoping some can share or tell us from your experience any items that are crucial to include on the following:List for tenants departing,  check list for cleaning etc.Walk through check list new tenant.Hand out to educate new renters for what is expected, rent payments to be sent/deposited to: (new owner). 

I'm hoping some can share or tell us from your experience any items that are crucial to include on the following:List for tenants departing,  check list for cleaning etc.Walk through check list new tenant.Hand out to educate new renters for what is expected, rent payments to be sent/deposited to: (new owner).