The equity you're building up is still money you're building up, even though it isn't immediate cash on hand, just like if you put money into a 401K, you'd still count the interest you're making even if you can't take it out right away.

So investors can take the property off their hands and lenders still get their cash?

It will depend entirely on the class of property and the amount of hands on management you are intending to do. 

You can offer a check  when they hand you the keys and everything is out.  

However when you want to get boots on the ground and really do it, you'll need someone to hold your hand that's been there before.

On the other hand if it is non-refundable, then the tenant won't be expecting it back and therefore the previous owner may not need to give it to you. 

What could happen is that their keys land in the hands of a relative who then proceed to SQUAT.

On the other hand, if you are accredited, then there are many other choices with much more experience, much more skin in the game and/or much lower fees.

We were not able to view the property before hand but did have pictures and a assessment of the property to go off of.When we finally closed and went inside to look it over and get a plan together, we noticed that the paint was peeling (the LR and hallway are a lime green and every other room in the house is a different color) in just about every room.

I'd run the vent duct outside if you possibly can, greasy kitchens are nasty.