Now I'm being told that the interest rate is more realistically going to be 7.125-7.6%, which makes the purchase significantly less desirable.So my question: Is 7.125% market rate or is this something I should be looking into?

Research affordable markets, real estate investment groups, and neighboring areas for better rental markets.Good luck!

There is a lender willing to refi cash out the property right know, should I take this lender offer, or would it be better to go to a local Credit Union or Bank and have them run the numbers?

I am not an LA or So Cal real estate expert, but from what I generally know about the market is, if you can get any positive cash flow (with "reasonable" down payment), it is likely a win.  

I'm a Real estate investor new to the middle TN market and am looking to build a team of agents, lenders, contractors etc.

From around 2010-2020 I built and managed a small-medium-sized portfolio in my area (which is not an ideal market).

The other unit is occupied by a tenant that has been there for years and is paying 150% or more less than market rates for rent.

I would look into local REIA's there and look through their vendor directory.

And I am under contract with my wholesaler.however your not under contract with the owner.. so I think you are in no mans land and if it was sold bought vastly under-market I think the seller will prevail if they can prove they were lied to about true value 

Local FB investor group potentially.