However, that same market segment usually isn't interested in larger houses, such as a 5 bedroom. 

You are correct that it can be called but you are also usually given the option on either adding to the account or selecting what to sell.  

Your calculation’s close, but cash-on-cash return is usually about cash flow, not appreciation.

Prepayment penalties- usually 1-5 year terms.

I usually see around 10% in central Oh.

We usually rent there each year in February. 

Thankfully we don't usually see it at any scale, most often it seems to have been "a" person acting off assumption vs facts and get's "corrected" after not much time. 

Now, if you were NOT a "real estate professional" you would only be able to:grab the rental income ($100k) and subtract that from the rental expenses/depreciation ($117k), now that extra $17k loss can only be used to offset future rental income, not the W-2 income and dividends and interest income. 

I’ve consulted several different people and they have told me in my situation as an investor expanding their portfolio it makes more sense to keep the extra cash as opposed to paying down rentals.

You take a deposit per usual and charge them for any damage beyond wear and tear.