Unless you know All of the laws and procedures that apply you don't know the true risks and pitfalls involved, therefore you can't determine a proper strategy.

Investing in historical properties comes with its own pitfalls but so worth learning about as we can acquire these homes for fantastic prices, people love living in them and pay a premium to do so, and they are so worth fixing up and maintaining because they are beautiful. :)As far as your $3K you have saved I would like to give you another perspective.

What are some hidden pitfalls (if any) with larger scale investing ?

We line up three to four houses, go look at them, take pictures and notes, and then he goes on about his business knowing that if I found something I liked, I will call him back.The pitfall to working with investors is that you make a lot of low offers.

We want to try to avoid all the pitfalls and enjoy the process of being an owner landlord.

I understand the pitfalls (market tanks, etc) and I wouldn't get 5 year ballons if you are undercapitalized or paid too much to begin with, but I think the pros outweigh the cons if you want to Expand the portfolio once you are tapped out on the conventional side. otherwise you need to wait until you payoff one off your conventional loans.  

Also any pitfalls I should lookout for?

Don't get caught up by the credit card pitfalls though.

At this point, you can learn the TIC TAC TOE method of taking title with little or no money in the deal, be an owner and avoid all the pitfalls of conducting your business!

Are there any pitfalls I should be aware of?