due diligence on a supplier of bulk rented & rehabbed SFR's

[Dave Pate]

I've been talking to a guy who sells packages of 5 or 10 single family houses, rehabbed, rented and under management. Here's the ad:

"Several rehabbed rental properties for sale.
0 down;
5% interest;
30 year amortization;
no prepayment penalty;
13.9% cap rate;
181.90% cash-on-cash return.
Please email/text/call for spreadsheet and photos."

I'm having lunch with him this week. I've seen a list of 5 properties sold. They appear to be in C type areas and houses average about $40k asking price with published rents that look slightly high. I've been sent a link to a Security National Mortgage Company application with the name of a licensed mortgage officer.

The attractive part is getting rehabbed and rented properties with full financing. The up front money is a $5k buyers fee (or 1%, whichever is greater) and the cost of appraisals. 

Has anyone seen deals like this lately? Have you seen scams like this? What are your comments and what would you ask the guy?