However, when it comes  to all the red-tape involved with retirement accounts, better safe than sorry is the best motto.So the moral of the story is to ensure that you don't eat up 90% of your IRA funds on a down payment and closing costs.

Account Closed - I am a very simple man when it comes to eating.

The mortgage eats up nearly all the rental income leaving about $200.  

If a new tenant comes in every 18 months, that eats away on a few months of cash flow...Is they typical?

The maintenance, repairs, and vacancy can eat up a lot of your cash flow. 

you EAT the decisions of the PM and have liability for the results.With absentee ownership, you may have no choice but to use a PM, but 19yrs being 2hrs , 120 miles away, I created a local team to do the heavy lifting and I did the screening and decision making - - seems to have worked out well (see profile).

How do you proceed when an out-of-state owner says they want to sell, but that capital gains would eat up their gains?

What I can tell you, as a startup, with few properties, the tax return alone can eat up most of, or all and then some, of your profits.  

I would tell them your concern about vacating and you having to eat the costs of an unexpected turn over and that you would like to help them with their new exciting addition to the family as much as possible.

Here's an idea, don't eat paint chips!