You buy a distressed or undervalued property, add value, then refinance it to capture the money you put in (and maybe some profit) then place a tenant to pay the mortgage and cash flow the property.

Because they are primarily lending against both the current value of the distressed property and the potential ARV (After Repair Value).

They don't like to lend on heavily distressed properties, so don't try one on your first attempt. 

Buy a distressed multIfamIly wIth as many doors ( up to 4) as you can afford .

FWIW, I had a very similar experience...Purchased distressed duplex, fixed it up, hoping for a 175K appraisal. 

In B-ham you've got loads of B- C+ inventory that you can buy distressed and get rent-ready for $50s-$60s all in, rent out for $800 and get appraised for $75k-$85k.

I had luck because the property I purchased was a distressed fannie mae property listed in HomePath app.

If you are buying it 'as is' or distressed, make sure you have a gc you trust to walk through and give you an estimate and scope of work.

There are a lot more duplex and triplex our there, some of which were sold as distressed properties.

But in our market Oregon Washington if you wanted the best deals on distressed assets it happened within 48 hours of the actual sale.