If the lender is okay doing a hold back, you could close at the higher value, payout the contractors from proceeds after close for work completed up to that date, and or pay out on a schedule as work is completed like a renovation loan depending on how good your relations are with your title person.

If you can find the property at the right price with the right gross income to achieve your final net Income that would be great. there is no "standard" of what you should make, whether its a SFH or a 2FH. if you can make a profit, that is great, if for now the property breaks even, that's not bad either, that means it is being paid for by your tenants while the equity builds and that's happening without your money and most likely tax free ( especially if you keep it for your relatives to inherit). so do not feel you have to follow a specific "Rule".

Your relation does matter, although being related is not a 100% deal killer.

How would you convince your relatives to invest? 

How would you convince your relatives to invest? 

,If your relative is serious about buying, find an agent that you trust and that knows Sacramento to get some help. 

If you just gifted your relatives 6% of the sales price, could they qualify for an FHA loan?  

Also having been part of closing out one's estate I would say that you are doing your relative a big favor by allowing the money to go to their estate versus actual real estate because then the executor of their will or trust will have to deal with it. 

For the loan, I've seen lower than 14% on hard money so let me know if you want some recommendations.As for your related question, in my opinion, it's best to ensure that all utilities are on for the duration of the project so you can spot/diagnose potential issues as well as simply for convenience.

By the way, unless your relative have a high paid, very secure job, and a big reserve, 2K negative cash flow is quite risky.