While they're great and have invited me over numerous times for a beer and BBQ, I don't want to blur the lines of our Tenant/Landlord relationship.

In today's economy it's better to either own apartment complexes (which don't require any experience) , Fix and Flips, or Quick Flips.I do believe that real estate property ownership is a game of quantities and how many offers you make will effect your success. 

Along the way the GC and subcontracted plumber mentioned numerous times that they found great news or thought of more efficient solutions (i.e. the mainline plumbing under the basement was intact--that they had assumed was all broken and needed replacing).

They could be unsavory for numerous reasons (as an extreme they could be child molesters or drug dealers).  

I'm not worried about making less money, but I am worried about being on the hook for out-of-pocket costs on large quantities of real estate. 

Yes too numerous to describe in a short reply - plus ethical issues

Then he discovered the judge from Housing court had previously put a demo order on the house due to a past owners negligence and not correcting numerous code violations, also recorded on title.

However, this strategy has been used successfully (without IRS challenge) by numerous property owners for nearly 20 years, including many public companies that have reported their transactions to the SEC, with the full acquiescence of their boards and outside auditors.

Been reading numerous personal finance books and lurking BP for a few months now, but the savings are finally shaping up, so I've decided to take it more seriously :) I'm a recent college grad from the bay area who's been in industry for about 1-2 years now and I'm really interested in setting up a positive, reliable cashflow for myself to reach financial independence.

There are numerous ways an owner can carry financing.