How do I approach this sticky situation with a friend who has stricken me from his list? ?

Only thing you can do is write him a letter and tell him what you said in your question basically. I may have let him know about the other place before I went ahead and did it, that was kind of sneaky on your part since you said you did offer to purchase his house. Although his mess up was just wrong so sounds like the situation he had envisioned wasn't going to be. Especially since he spent the rent/mortgage money on other luxuries, I can't blame you one bit. Tell him this but don't be a jerk about it and tell him you want a truce. He isn't innocent and so I'd say he needs to get over his mistakes and move on, he should quit holding a grudge. Call a truce and see if he responds. If not, you tried and somehow move on. People do this all the time. Good luck and hope you guys can just call it a scratch and save your friendship, life is too precious! Tell him that also.