When spending the money on a full gut we will always optimize the floorplan to blend the old with the new.

For sure access the equity to invest in something else and keep growing, but I would consider a HELOC or even a HELoan to access the equity, this second position debt will likely be at an even higher rate, maybe 8%, but it would allow you to also keep the original loan in place, so the blended rate could be lower than the 6.7% refinance rate. 

In a perfect world, I'm trying to find a blend of cashflow, lack of warzone categorization and all that comes along with it and also some moderate appreciation.

i.e. cash-flow, appreciation, blend of both, etc. 

I've been following the California market (quite high entry cost, even away from coast), Texas (austin cap rates too low, houston could be interesting) and Florida (seems a good blend of low entry costs and decent cap rates). 

My opinion/preference right now is a blend of risk profiles within one asset class.

so in my mind having a healthy blend of free and clear and some with debt is a nice thing to strive for.. with the ultimate goal when you think your going to live on this income the rest of your life.. you want them paid for.. one other reason come 10 to 20 years into these things Major cap ex is going to start happening..

The damage was visible as cosmetically the repair is not blended in to the rest of the floors.What assurance should I ask from the seller to ensure that the root cause of the standing water damage is taken care of ?

Slate is the new stainless @Lucas Carl , a blend of silver and black.

We meet monthly and have done a great job structuring the meetings to blend networking and sharing knowledge!