With a lot of these deals, they will be very disheveled, and you will need to buy them with hard money instead of conventional financing. 

I aim to refinance the loan under conventional investment terms to avoid the high interest rates associated with hard money loans.With an excellent credit score, securing a loan shouldn't be a challenge.

Here is what is being considered:SCENARIO 1):1) Parents loan us money at X% rate.2) Loan terms would allow for early payment without penalty (we would get a conventional loan in 2-5 years to pay parents back). 

There is little inventory   If you have a deal that works with todays rates  go for it .   

Rents for apartments and single family homes are up significantly, and I don’t see that trend ending any time soon: we are severely lacking in housing and available inventory.

Here is what is being considered:SCENARIO 1):1) Parents loan us money at X% rate.2) Loan terms would allow for early payment without penalty (we would get a conventional loan in 2-5 years to pay parents back).

Tried going through a conventional bank.  

A contractor has quoted $7K worth of work to move the water heater, relocate the hook ups, remove and replace walls etc in order to allow for a conventional 2 machine setup. 

Furthermore while some neighborhoods currently have a glut of inventory, its not the case city wide.

The market segment you are investing in has plenty of inventory and is selling very slowly.