The cap rate is 10% (you're earning 10% annually on your investment).So, if your target is to buy at a 10-cap: If the NOI is $15k...now the property is worth $150k to you.If the NOI is $7,500....now the property is worth $75k to you.This is essentially how cap rate determines price when using the income approach to value properties.

She did put in a lot of work on the project and I guess I am not opposed to paying for that, just how much that is has been bothering me, because any amount he comes up with is fine because essentially whatever fee we pay her goes to him anyway.

Your budget will depend on how many letters you need to send in order to start creating revenue for yourself. 

Essentially if you are living there you have a say in picking your neighbor which you don't in an apartment. 

Your way is essentially at $170k with $14k down.I like Bill's idea of an LOi.

So, does anyone have any suggestions on how I can fairly structure this deal so that:1) I can pay the asking price as a lump sum to my grandfather at closing (seller financing doesn't seem fair in this situation and could get hairy, considering my grandfather is 85 and many of the seller financing deals are for 30 years.)2) I could hold on to the money that I have set aside to invest in my first multi-family place (essentially I would like to put low or no money down on this deal, maybe Brandon's book could help!)

I would not suggest running your first project any further away then an hour.  6 - If you are trying to flip out of state with a partner you are essentially becoming an equity partner/ lender. 

Therefore, it is important to have some metric of what the NOI will be when you need the capital to flow out as part of your IRR strategy.Presuming you are correct about stabilized rents, and presuming that we are all taking educated guesses as to the Cap Rate in the future, something we have no control over, the things that are most most important are escalation of rent revenue, OpEx, and economic loss numbers.

I would definitely agree with you that self-managing is a great option for some owners, but does require an investor to understand their own skill set and align it with their desires for their asset performance appropriately (If max ROI is desired, do they have the skillset necessary to produce top revenue numbers, etc.?).

Having your own license is essential if you want to have the weapons you need at your disposal at any given time.