It's an initial 5% and then 1% a month.

I guess my initial thought was I’m not planning to stay there forever.

My next steps are going to be continuing to save money and try to make some connections with lenders and wholesalers.

I have a lot of confidence of on-going short-term rent appreciation (next 5 years) but less confidence of significant on-going property appreciation (I expect a leveling off but am not real confident of any prediction).High end homes (bigger and more expensive) have worse cash flow than middle class or working class homes.Note a small multiplex or your 16+ unit will experience similar rent and property appreciation to your SFR and have better initial cash flow (it will be poor initial cash for San Diego but increase with the rent appreciation).To summarize, SFR are not the best buy n hold investment option in San Diego. 

That should allow you to cash out most of your initial investment assuming the refinancing appraisal / ARV align. 

What is the next step I could take?

I was thinking of something along the lines of a Wraparound Mortgage that has the initial $60,000 then having different options for the sellers depending on how much cash he wants now.  

@Khorey Beauford Congrats on taking the first step!

When your folks pass, and you inherit the properties, the IRS gives you a one time step-up in basis value on the properties. 

And are there any steps other than filing the document with the court?