They feel that CA prices will likely increase and when they do, at a rapid pace, therefore, they are willing to pay these lower spread, higher prices, rent and hold for as long as it takes, taking negative cash flow along the way until that payday comes.

If the numbers are remotely close to what you showed, this could be a big payday.Even selling the house @ 55% ARV less 150k in repairs is a $150k payday for you.

With flipping I figured I would have pay day at the end of the flip to repay them sooner and quicker.

But I'm delaying my payday to limit the investors risk and get their initial investment back as soon as possible. 

We are comfortable not taking a pay day for a while, but our risk may be too high.

I would be very upset with my realtor as well if they got me amped up for a $545,000 pay day, when the house was only worth $505-515,000.I had a house not appraise.

They are looking for a big payday in a relatively short amount of time.

After you pay off all the underlying debt of 181,700 you have 22,300 to play with for free so your cash on cash return is infinite because that $387 cash flow is assuming you get all of your down payment back plus a 22,300 payday, and then you can stop trying to keep track of what loans to pay.

It wouldn't be much of a payday even if the loan interest is max allowed by WA usury law, but it wouldn't be a loss.

I suspect your payday will be when you sell down the road.I ended up buyjng a 3 flat in Bronzeville in 2015 due to the same concerns you described(cash flow).