(Or “neighborhood experts”) You can offer some money too.

It would cost a lot to get the planning approval and do a complete renovation of the 2 units.Can anyone suggest what would be my options at this point?

.- Does anyone see any flaws or can offer some improvements/considerations to the financing strategy of this plan? 

These areas attract long-term tenants who are willing to pay for quality housing​​.Mixed-Use Properties:Properties that combine residential and commercial spaces offer diversified income streams.

Also, I've always wondered why arbitragers don't negotiate an option to buy upfront?

Since the mortgage rates have been higher than previous years and the inventory has been lower I'd recommend looking into multi family options that are currently cash flowing in areas that values are increasing.

Still, I think you'd find it difficult to find one that would be a good long-term investment unless you had another ~20-30 years to go, it's at least cash neutral, and you don't plan to hold it too long (to avoid too much investment loss and before you get to the point where it's unsellable because of too few years left); that's another way of saying that maybe it suits your cash needs in the near-term or is at least less of a pill to swallow than other options until you find something that's more of a sensible long-term play

I do agree with @Jules Aton though, the best option may be to wait and save up for your down payment.

I’d focus on property types that align with my strategy, leveraging financing options that fit my budget.

If you ever need insights on financing options for rental properties, including DSCR loans to scale your portfolio, I’d be happy to help.