As was mentioned often times there is a reason why the buyer seeking SF is not at a bank getting a conventional loan.  

The primary reason I'm asking is because for my buy and hold strategy I'd like use hard money loans to buy distressed properties, rehab them, and refinance based on the ARV to a conventional mortgage.

However, with not having much savings, I am wondering if it is wiser to get an FHA loan with 3.5% down and the required mortgage insurance premium (1.75% I believe)  or live in a rental until I can afford the 20% down payment to reduce my interest payment on a conventional loan.

Delayed Financing usually costs a bit more than a conventional cash out refi.

With the comps you're showing, you are better off finding a similar property, not needing rehab at the same ARV and just getting a conventional loan.This is all assume the property cashflows.If you have some data on rent, taxes, expenses, etc, I'd be happy to help you figure out if the deal makes sense as a buy and hold.

Back to the numbers....Conventional Loan 25% Down: $45k  Amount financed: $135k @ 4.75% 30 years - $706/moTotal Renovations:$16k (I'd say $12-$13k was related to the one unit's rehab - new flooring, new a/c, new fridge, new kitchen cabinets, new toilets, new water heater, painting, new washer/dryer, replacing back door, refinishing tile in baths.  

Also he has an inventory of rentals that he is planning on selling off in the future.Currently he has two properties for sale that I am interested in, one a 3br/2ba for 78k and the other a 2br/1ba for 55k.  

If you have an FHA loan, does that mean you can get only 3 of the easier to qualify conventional loans, and 6 of the more difficult ones?  

If your putting conventional financing on it then know that you could end up coming out of pocket if the appraisal doesn't meet the price.Present the seller with two offers.

I know, people get bored and look for things to dream up to make some money, I really suggest you not, stick to conventional transactions, your creativity is dangerous for you and others.