Great house in a great neighborhood, so as long as the tenants keep it up, we're friendly with the rates. 

Bonus if you buy solo, it will now be recognized and we can use our seller concessions to buy down our rate or whatnot. 

People are willing to pay the high interest rate because they expect to pay off the loan quickly.If you own the home outright, you would go to a traditional bank to cash out the equity.

My guess is that the arrangement you contemplate would not meet FHA underwriting guidelines, but I am not a MLO and have not had a conventional or FHA loan in decades.

Lynn, This is a tricky situation but I believe that giving up a 2.75% interest rate is challenging to give up as we may not see rates that low for a long time.

If so you can look into Cash Re-Fi (not as popular these days with high rates) OR look into Home Equity Loan / Home Equity Line of Credit.

Rental rates typically do rise YOY, but if you are using future rent projections it is a good idea to get a historical data of rent growth in the area you are investing in. 

I presume you might have found the Ann Arbor REI meet up? 

Draw schedule to be agreed upon prior to closing.Term: 1 YearFee to Lender: 2.5 points – ($13,125 paid at closing from loan proceeds).Interest Rate: 11.5% Interest-Only billed monthly on outstanding balance.Interest Reserve: $15,000 – approximately 6 months interest, paid at closing from loan proceeds.Once interest reserves are depleted, borrower to make interest-only payments monthly.Pre-Payment Penalty: Should loan be paid off prior to interest reserve funds being depleted, a pre-payment penalty will be charged equal to the amount remaining in interest reserves at time of payoff.Loan 2: Loan amount 490,530.60Lender Points: 3%broker points: 1%rate: 11.99%Term: 12 months (interest only)Prepayment penalty: NoneProcessing fee needs to be wired before LOI can be issued

It will give you the time to adjust your pricing strategy during different seasons and give you time to gather reviews which impacts your booking rates.