I would focus on saving enough money that if I had a deal go bad, then that money I saved was there to cover it. 

My guess solely looking at your numbers is that it's an older/distressed property which means you have to account for more costs in capex. 2nd thought being it's not in the best of neighborhood then you'd have to take into consideration lower quality tenants/ neighbors and maybe increase expected vacancy and late payments.

Take into consideration that when the person you gifted the property to will have special tax considerations as well 

I’d recommend saving that $295 cash flow for some amount of time until you have considerable cash reserves saved up.

Double your money on your 60% left over. 

one thing is your lending your money way under what private money should charge. unless your just doing your friends a favor..

You would actually be borrowing less money than originally but at a higher rate.   

Maybe they don't need the money now but in 5 years they wan to send a grand child to college.

The property will be strictly for investment purposes, not a primary residence.I’ve been looking into two potential financing options:Hard Money Lenders (HML) – I’m drawn to this option for its speed in closing, but I know the rates can be higher.DSCR Loans – This seems like a great option for long-term rentals, but I’m unsure if it’s the right fit for my auction property since it might need some rehabbing.I’m also considering purchasing through a land trust or an LLC to add a layer of protection and privacy.So, my questions are:What’s the best way to approach financing for auction properties?

Many Realtors will suggest purchasing a property using a FHA Loan, to reduce your out of pocket money.