Hey Jack, There are two types of loans investors use in their BRRRR strategy. 1.

Quote from @Caleb Brown: Is the property worth the higher price to pay off the loans?

The VA and Fha loans have been able to do it but their strict appraisal guidelines make it tough to buy the often older homes in my market in Virginia Beach / Norfolk Area. 

You're probably better off getting a Hard Money Loan.

That will typically generate a response from the PM to negotiate a settlement and avoid an investigation.

The house had some signs of foundation settlement when he bought it which were chalked up to age, however it’s clear now that there has been more recent movement (some of this may have been due to an earthquake a few years ago) causing about 3 inches of settlement along this very small house.   

@Summer Shelton yes, FHA loans do allow this but make sure you speak with your lender about some of the trip ups from these loans.  

I know a lender that does 15% down on investment loans.

It sounds like the Title Co. was not aware that the tenant prepaid rent and just prorated the current rent for the month of closing, so agree if they had no knowledge of it, would not have ever gone on the settlement statement as a credit to the buyer and they likely will not do anything post closing to help obtain those funds. 

They are just going to use their 2nd VA loan to buy their next one while this one is tied up.