Lender comes back and says since its "not a traditional rental" and sits on 2 lots its going to cost more and says the cheapest they've found is $600.

As an investor, it's often difficult to qualify for traditional mortgages -- for this exact reason.

The payments are going to be high because they aren't amortized over ~20-30 years.Use the HELOC to purchase the unit but then refinance the building into a traditional loan, then repay the HELOC.

@Melanie HeigesOkay. that makes sense.You have a few choices for flips:your own cash, or cash pooled with other investors.hard money or similar private lenders.You don't typically get a traditional bank loan for flips due to the condition.So, you would either get hard money loans that will lend for distressed properties or use you own cash.Hard money lenders base their lending on the project, not on your personal finances.

Traditional lenders typically won't finance your rehab costs, so depending on how much equity you are willing to put in, HMLs are the way to go. 

Owners are a couple going through a divorce unfortunately and have tried to sell their property traditionally with an agent for about a year now with no success.

I have talked to multiple eviction attorneys in LA and most of them are factories, and churn through the traditional 'tenant not paying their rent on time' cases.

Those aren't FHA specific things, those are things that any appraiser on any traditional loan program will likely call out.

Would a new buyer consider the loan assumption versus a traditional bank? 

(Avoids tying up 20% of purchase price for down payment required for traditional mortgage of my cash)Once closed on.