Are we saying that the logistical nightmare of owning property out of state more than destroys that additional 1.3% return?

No if it's priced right it's a steal for most buyers.The fact the you mention THE RIGHT buyer indicates it is overpriced and the seller is wanting you to find THE ONE buyer who will pay top market for it.So it is either a steal or it is not.Usually that market is slow moving as those are move up homes and many buyers are underwater in their current homes.Research in your area WHAT IS SELLING.I focus on what buyer are wanting to buy in the marketplace and NOT what sellers are wanting to sell.Your MLS will have data on what product type is moving.Expensive homes have a bunch of outlay in marketing costs so the listing should not be taken lightly.Some friends that have been selling upper end homes for years provide basic marketing and anything additional make the seller pay for it and keep the receipts.Then when it sells they credit the seller off of their commission.This way if the seller wants to take off the market early or change brokers/agents and not give you the average marketing time to sell it they are out the money and not you.It makes the seller think long and hard about correct pricing when it is THEIR money on the line.

Do you avoid making offers on REOs if they have major unpermitted work like a patio, reroof, or fireplace or room addition?

I would still love to here about any problems or experiences people have had with unpermitted room additions though.

In addition to any purchase, holding, and closing costs I would incur, that scenario would work within my financing strategy.

I am thinking about getting back into lease options to have some additional revenue sources.

Another alternative is to ask him to sign a new lease, with pet addendum and additional monthly fee.

drivers who see your sign sure will.A side benefit, if you have other properties nearby you can put a sign up to generate additional leads for those properties with less traffic.

Additionally the bank requires the borrower convey a warranty deed and clear and marketable title to you the new buyer.

Unless he is giving you some sort of discount for the bulk work make him earn each additional one in the sequence.