I invest primarily in a lower cost area but also own property in, and am looking in, a higher cost area.

Offer to pay them off in 5-10 years at a higher interest rate.

They find properties and approach Sellers and secure a price, then they seek out an end Buyer (you) and sell it to you at a higher price. 

Id keep looking if it was not an approved short sale ( even an approved short sale takes a very very long time and theres no guarantee that you will even close on the house after months of waiting). q1)There are plenty of non traditional lenders that could offer you construction financing if the numbers make sense but it will cost you with points and a higher rate.

Increase the occupancy rate to 80% or higher over the next 12 monthsto increase the value.

I am assuming that even if you strucutred it with a higher purchase price (85% of value) and pre-paid rent it would potentially still be frowned upon.

Unfortunately due to the business you choose to operate incidents like the one you experienced are more likely to occur compared to a property that's continually occupied by a tenant where the water would more likely be run at a higher frequency which would prevent the pipes from freezing.  

@Bryan HartlenManaging low-end properties can be demanding due to higher tenant turnover, increased maintenance needs, and frequent rent collection issues.

Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders.

As far as credit, you would want a score above 680 ideally to get the highest loan to value on a cash out refinance, but I would aim higher at 720+ as that comes with a significant rate drop.