I add up your risk controls to be 40%.  

AJ Golden IMHO, that depends on what kind of income, "line of credit," insurance deductibles, and risk you can handle.

My concern is if the properties I am financing are involved in a cross collateral agreement that relates the apartment sale, and there is some kind of default, would the bank be able to step in (because their agreement precedes my first trust) and prevail to recover the properties that I have the first trust on?

If your at least 2 years into your ownership and the property value is high enough you could possibly get into an Freddy loan.Now, note that the second option is only viable if your estimated NOI for post-renovations is true which makes option B a higher risk option. 

@Sameer Jain, it depends on what you're trying to accomplish and risk tolerance.

In California, many homeowners are having to get specialty insurance coverage due to the increasing wildfire risks from droughts.

@Abdul Azeez, I think that the problem is that you are stacking the deck against yourself trying to do all of these things on your first deal:1) Purchasing the property from an online auction site / bank, which is notoriously tricky even for the experienced investor, due to their proprietary contracts and minimal due diligence period and strict deadlines.2) Working with a new contractor that you haven't used before, or seen their work before, and who may not be used to dealing with investors.3) Trying to get conventional financing on a property that has a short closing time and where the mechanical systems cannot be tested.4) Working on your first deal by yourself instead of partnering with a local investor who can guide you along, or at least a mentor who you can turn to with questions.My advice is to make it easier on yourself by considering buying a property with a standard contract and longer due diligence period, network with local investors who can provide you contractor contacts and also some guidance, and consider using private financing or hard money instead of bank financing.In my opinion, buying from the online auction sites is a more advanced strategy that you can use once you are able to ballpark construction costs yourself and/or you have a trusted contractor you've worked with before and/or you have private financing or hard money set up so you can close fast and/or you can purchase the property without interior access and hope to get lucky in terms of condition (but still buy at a price where you are comfortable doing a full rehab if necessary without losing much money) and/or you are familiar with agreement of sale contracts and closings in your state so you can assess the risks of using the bank's seller-friendly contract.You're already doing the right things by asking questions on this forum, and taking action.  

HOAs are good for the community if they're managed well and if you're the type to purchase several properties and you want to target this community I would recommend becoming involved in the Board.

I have a lot left to learn, but I am excited to start getting involved in the community! 

Don't force a deal, it creates more risk somewhere else you haven't thought about.