We would also qualify from an income standpoint for traditional financing for both properties, but cash for downpayment is the issue as 25% down is required for 4-unit building. 

However, the seller knowing my specialty, countered asking me for a proposal with more upside for the seller or to do a rental arbitrage.My initial offer was a 5% upfront cash payment, 15 year repayment plan at 4% interest and attempt to refinance within 7 years to repay the seller in full and secure more traditional financing.  

Here is what they explained that some of these cash offer are doing and I'm needing clarification if this is accurate and if it is possible:- You can get a loan from your investment brokerage for up to 50% of your investments (not sure if this was IRA or traditional account).

It will be hard to secure a traditional loan without enough income to keep your DTI ratio in line with the requisite thresholds.

When investing out of state and getting a traditional loan, do I need to use a bank local to the investment property?

The house is dated and unoccupied, so I'm trying to be smart with design choices and spending to increase rent.

That means lower cash flow than if you had the traditional 20-25% down payment. 

If you don't know how this works, then investing in more traditional markets on the mainland is likely the better way to go.

Then you can make a choice from there.

Not sure if this is the correct forum, but of all the choices this seemed most appropriate.