What are the biggest challenges in verifying income?

I'd estimate that there are less than 1,000 legitimate, or "professional" wholesalers, in the United States of America, as defined by individuals who make $100K flipping contracts, and collecting assignment fees, in any form, and who have made that amount of income more than 3 years in a row.

There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.2.

After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.Buy four houses with $50,000 down on each.

This allows participating in the $1.1 M equity with a ROI of 100% and on going 25% annually with the historical appreciation over 30 years of 8% a year. ( Zillow stated a 10.4 % in the last 30 days $251,361 ).

Quote from @David Brooks: I've received advise that our friendly STR loophole can not be used to characterize STR income/loss as non-passive on a California tax return. 

It is now treated as a former passive activity and those prior losses can only offset income from that same activity going forward. 

This could reduce your taxable income in those years.Your decision depends on your long-term strategy.

You would just be using the property's income to qualify.

Some, like James Dainard, emphasize an annualized cash-on-cash (COC) return of 60%-80%.