I would do the first fix and flip for the love of the game, know all the details so in the future your contractor can't screw you over, or if he's doing something fundamentally wrong you would know.

I'm just trying to figure out if this is a healthy financial practice or maybe an indication of something gone wrong.

You are at the mercy of comparables with 1-4 unit investing.You can contest an appraisal if there are clear errors (wrong room, bathroom, or square footage counts) or poor comps were used. 

But I'm most wrong & have bad timing :)

There's bunch of trade offs but we invest in CA because it's close to home, high quality, high demand, and if anything goes wrong I don't have to hop on a plane to go see what's going on.

I’m not saying your wrong, I’m saying this isn’t a recession we’ve seen before, any result is possible. 

Or even be able to ride a wave for 6 or 12 months if I invest at the wrong time. 

Don't get me wrong, Wyoming, Nevada and DE have asset protection benefits for certain business situations, but you certainly are not avoiding any home state taxes or filings by doing this. 

I would say that you are asking the wrong question, but if it works for you why do you care what I or anyone thinks?

Of course there are wrong ways to do it, but the wholesaler I'm working with operates this way and they do 50-80 contracts a month with a stellar reputation.