If the LC has not been recorded (common) in most places you don't have to foreclose if they don't make payments, but can just evict, a much quicker procedure.

I'd mitigate the worst case by not going over $150K on purchase price.Also, it looks like you have some money, so even in worse the worst case scenario, you could sell and sustain a loss without sinking.In the expected case you will invest about $200K and earn about $20K, a 10% ROI.  

I also have a friend who is very serious about this as well and is interested in going in together.Do the same as the scenario above but instead of a conventional loan, put 3.5% and go the FHA route. 

What would be a worse case scenario if a lender was to approve me for a loan?

Roofs are a common issue in Texas.  

It is a common practice to use orders to break leases.

.$322.83/month Principle and InterestMonthly Cash Flow: $8.97I know This isn't a great cash flow deal, but I would essentially break-even until the property is paid off in 10 years if I held it as a rental.The other scenario, which I am leaning towards is to sell to an owner occupant with a wraparound mortgage.I could increase my cash-flow substantially, get a decent down payment, sell for a higher financed price, charge a much higher interest rate, and enjoy less management headaches.If I sold on a wrap I could sell for $39,900$5,000 down (tax refund time soon :)$34,900 amortized for 15 years @ 12.75% Interest = $435.84/month PIThis would allow me to make money on the front end ~$4,000 and make $133/month cash-flow.I could also play with the numbers a bit to make a higher IRR, but this seems like a doable scenario.Would you buy this?

We have run into several different scenarios, including a lending company who was working with a 3rd party lender that had "organizational" issues, so, after nearly 3 months of dragging their feet, they were not able to help us (wasted our time, plus the cost of an appraisal).

I can give more specific numbers of need be but thought I'd just start with the general scenario to figure out what to do. 

Well RE overtime does just as the above scenario, for the most offers appreciation, tax incentives, cashflow and .pay down of mortgage.