That process doesn't work if you buy a nice house with a maximum LTV conventional loan because you've done nothing to increase the value.

I may pay more up front, but everything is updated and I am financing it over 30 years, so it is just increasing my monthly payment.

Larger buildings have fire alarms and sprinkler systems; fire walls; wider hallways and stairwells with double exits, etc ... all measures to increase the available window to exit a building in the event of a fire.

Dead equity is doing nothing to increase your income.

@Joe Lambert That makes me think that the rents I have been using for the area are too low and I could increase my rent estimates.

My friend converted stuff to gas on the main house to increase Amps in the panel.

Your likely better off finding something that isn't rehabbed that you can update and increase rents yourself. 

Can I raise rents immediately or should I rehab to a certain degree to justify the rent increase.

You need a plan to increase the value.

I strongly recommend you increase them to 10% CapEx and 5% Repairs until to have accurate information.5.