Right now all of us are fine since we meet the 51% owner-occupied guidelines for Fannie Mae and Freddie Mac in regards to warrantable loans. 

The owner said he will warrant the electricity, plumbing, septic/water line, and air conditioning in the contract.

I want to come in and add W/D right away to each unit along with some cosmetic improvements to warrant getting those rents up (over time) to fair market rents.

Unless I know the history of a specific property and it warrants less, I use 10 for vacancy, 13 for PM, 10 for repairs/maintenance.

If they’re renting it to you that means the building is not warrantable so terms and rates will be through the roof.

Surely this has enough red flags to warrant rejection

Everyone has different risk tolerance when investing but given that you are taking equity out of your primary residence extra caution is warranted.Hard money lenders are also an option but in that case the deal would need to be good enough to warrant the very high cost of capital.Best of luck.

I actually think certain types can be decent investments IF you do the homework and read the docs and know what you're buying into.I personally avoid high rises (too much cap ex and high maintenance costs mean poor return), poorly maintained buildings with lots of deferred maintenance, avoid non-warrantable buildings or complexes (hard to finance), I prefer townhouses or 4plex style condos with only one common wall and nobody above or below, that limits neighbor and tenant drama. 

There social standards and social skills do not warrant "nice".This has been tried and failed many times with investors walking away wondering how tenants can be so irresponsible and so destructive.

Instead get a no trespass warrant taken out against her to stay off of your property and when she violates the warrant have her arrested.