I have been investing in residential properties in the Indy area since the last 7-8 years and I must say that this is a great market to be in.

For anyone who has experience with this, 1) is this a good route to take?

Of course you can, it just may take you a bit to get there.

I've been doing a deep dive looking at cash on cash return for various down payments and expenses on properties with a mortgage.

If this is financing for a stabilized property rate carries more importance but rate combined with origination fees, pre-payment penalty and term in which you intend on keeping the loan in place are all considerations which together should help in deciding the best financing option.

But it looks like a horrible deal. 

Yes, most large traditional lenders only focus on 1-4 units and other properties that fit into a box. 

(If you made an offer on a 20 year old home with a 20 year old HVaC and the inspector says it only has 5 years left.

The ARV, this is a learned ART..

Mike, My recommendation would be during due diligence for a potential purchase, ask for past 12 months of all utility bills, property taxes, and any other municipal requirements like rental permits, occupancy inspections etc.