I'm on house number 4 that I've lived in and renovated, so I agree that's a good strategy (I've done it just through life, not actually a purposeful strategy). 

There are no restrictions preventing out-of-state investors from purchasing rental properties in Texas—these investors enjoy the same opportunities as Texas residents.Additionally, the financing restrictions you mentioned don’t align with reality.

It's not fraud or anything because you are, in fact and in reality, converting it into something that is not a bathroom and doesn't require any permits.

@Shakthi Kamal read copy and paste advice below.For cashflow, you'll be looking at mostly Class C properties/tenants.Be SURE you UNDERSTAND what this means or your expectations won't match reality!

Actually you'd never hit that because eventually the debt pushes you into a margin call and forced sell and you'd be at or near $0 in just handful of years at best. 

Well, my therapist friends claim that the latter is not too far from reality. 4.

The reality is the land has value.  

Maybe the reason you disagree with the dollars is that you are comparing a cash on cash rate of return with actual dollars.

I’m excited to make this opportunity a reality but want to ensure that I bring the right partner on board to make it a win-win situation.Looking forward to hearing your thoughts and thank you in advance!

You have to adjust your expectations to match current reality, which includes higher mortgage rates, higher prices, more expensive taxes and insurance, more competition, etc.