This time, I would consider increasing your risk a bit now that you have the first one out of the way.

Increase your due diligence in screening tenants during the next couple of months.  

Face the fear--get yourself in front of more sellers.Little by little, your presentations will become more comfortable, and your success rate will increase.  

I definitely agree that rent by the room is awesome for increasing cash flow - again, it does come with it's headaches but with the higher risk comes higher reward (I've been doing it for almost 3 years now, it's really the only way to make the numbers work with little cash down on properties).From my personal experience, talking to others at meetups, and reading this post, I think there's definitely demand for specialized rent by the room property management.

@Kyle Kline“Investing for equity and not cash flow” doesn’t mean “buy properties that don’t cash flow.”To me, invest for equity not cash flow means that the PRIMARY reason to invest is for equity growth and an increase in net worth and NOT cash flow.I’ve been investing for over 40 years and while cash flow is important, it’s not why invest.A property must be self supporting ie produce enough cash flow to cover debt service, operational expenses including repairs and replacements.

With inventory tightening and competition increasing, what strategies have been most effective for sourcing truly undervalued properties?

@Ryan Williams - Leverage always increases your returns.

This really has not changed much but has increased since a few years ago everyone was pushing overpriced deals.So if you want to make the most money in real estate - you do not need to learn real estate just be a good sales person and fake it till you make it.  

That is assuming your DTI can cover the increased mortgage payment.If you have use for that extra $100k that you would get back right now then don’t wait.

Is anyone seeing a sizable increase in pre-foreclosures in their market yet?