In my experience, cash flow is key, especially for long-term holds, so running a detailed DSCR (Debt Service Coverage Ratio) analysis might be a good step here.On the flip side, if you're eyeing faster returns, a flip might be more lucrative.

Is the 5 property ceiling (estimate, of course) because of debt to income ratio?

Conventional loans that use your debt to income / DTI to structure the loan require 12 months seasoning to use the new appraised value for a cash out refinance.

You or both of you might think you have a $1.3M home but in reality its a $975K debt!

Maybe they know the owners or were able to get the owners to let them see the inside.The process would be significantly improved if there was an expiration time for the owners to become current on the tax debt. 

But thanks for giving me more to think about! 

The terms on the debt look good.

I would also put part of it in a debt fund. 

Is having debt not reported on credit is your priority?

To do delayed financing or a cash out, you can go conventional where you use your debt to income / DTI ratio to finance or you can do a DSCR loan if an investment property.