No, they are buying houses that need significant work before they are rent able. I'm not sure how the loan terms are structured, but they are getting good rates (they likely are doing two loans, one for the house and one for remodeling, perhaps with different rates - but rates you couldn't get overall). Banks will touch any house in current condition (Freddie Mac may not!), they just care that it can be sold - the land has value and the structure has value even when not livable.