Then he admitted his biggest mistake was not holding properties, so I asked why.

In CA a third party, escrow agent, generally holds the EDM, but at times, the FSBO wants to hold the EDM or is unaware of how to hold the EDM.

We didn't anticipate the housing market slowing when it did in August and now we are holding a flip that for all accounts should sell.

Never pay for work that hasn’t been done.3.Verify Work Regularly: Have an objective third party inspect the quality of the work weekly and provide updates.

They're spending tax-payer money, so they'll cut a check without batting an eye.Document condition before and after with photos, inspect regularly, and you should be fine.

Become a regular.

Good amount of buy and hold contacts. 

What is holding you back from just jumping in and doing it?

I know some mentioned about developing banking relationships and I totally agree with that, so here is what you do. 1) Open a business checking account in the name of your LLC to hold the assets. 2) Deposit your cash into that account to fund the real estate purchases3) After owning for 60-90 days, talk with a local lender about a line of credit against the 2 properties at 60% LTV. 4) After about 30-45 days, have the line open to use if you need that liquidity that you used, but until then you are not paying 7% interest on nothing. 

The only reason a property owner would agree to rental arbitrage is if they see it as advantageous to them over taking a regular tenant.