I agree that is will be a gamble as to how well it will do.Also, ask the owner if they will entertain partial owner financing to keep from dragging family and friends into this risky business venture.Maybe even rent from owner for a year with right to sublease to see how it goes before committing to a purchase.

(yeah, maybe I shouldn't be broadcasting my sick twisted forms of entertainment and strategy should I)BUT, most importantly is KNOW YOUR MAO and follow the math. 

Just keep in mind that entertainment expenses—like taking clients out for a show or a game—aren’t deductible anymore.And, yes, you can deduct 100% of your education expenses if you’re already a real estate investor.

For your scenario, you would be able to afford $8300 monthly mortgage assuming no debts. ($200K/12 months = $16k/ month of 50% = $8333.

And if they couldn't afford it, they should have sold, moved to what they could afford. 

Ability to repay - can you as the borrower afford the payments based on the loan amount.Typically they will not take into consideration the mortgage on a new property that has not been taken out as that is new.

These markets offer affordable homes, many of which are turnkey (new builds or fully rehabbed), with properties that have 10+ years of life left and are ready for tenants.

A home equity loan seems like a possible way to expand my portfolio, would consider buying a multifamily and renting out our current home to live in one of the units and purchase it as a primary home (assuming its 4 units or less), but being in the Santa Cruz CA area, I am afraid I'll need to look outside of CA for any deal that makes sense, and can't afford to lose my great job (can't work remotely).  

These areas are becoming 'micro Big Sur-esque,' a more affordable piece of the Pacific Wonderland. 

Or try the reverse - rehab a property to Class A standards in a Class D neighborhood and try to get a Class A or B tenant to rent it.Unfortunately, many newbie real estate investors are jumping into buying affordable Class C rentals - expecting Class A results.