Nevertheless, if out-of-state investing is viable for you, vet your team accordingly, especially if you intend to acquire a property that needs work.

Yes, your cash flow on the Farmington property will take a hit, but you're leveraging that equity to potentially acquire two more properties.

The reason is that the replacement property was acquired by a "different taxpayer." 

In most cases they will try and help where they can.Not saying this is right or wrong but I had a similar situation with a property and after getting past the underwriting and securing it I went to the city (Atlanta) and said I just acquired the property, realized it was a quad that was converted from a duplex sometime in the distant past but the building was still zoned as a duplex and wanted to go through the process of having it moved to a quad.

In the past we've used a property manager, but this will be the first time that we are managing our property and having to go though the process of acquiring a new tenant.  

Knowing this, what types of properties do you believe you will be acquiring using the Subject to method?

I personally won't be doing them here in MD, but some people specialize in acquiring those types of properties and I would strongly suggest you to attend local meet ups and try to speak with someone who had done it successfully and never got burned.

For this strategy you have to acquire a building within walking distance of the L.   

And generally, they took longer to rent, longer to sell, cost relatively similar (maybe moderately less) to repair and rehab as other less affordable areas, and had more turnover than desired.I also have a good friend/investor who owned over 100 sfr doors in the Detroit area that they were acquiring amazingly cheap, then rehabbing them.

Seller financing can be a great way to acquire property, especially if the seller is open to it and favorable terms can be negotiated.