It's the only place I can think of that is that dangerous.

Financing is subject to its own distinct rules and as others have said; 5 units or greater require commercial financing.  

If you tell them you read a book and decided to start a company and become an investor they are going to smile and hand you a flyer for a free small business checking account.The bigger problem is this could be very dangerous.

:This is definitely a dangerous idea.

Even using numbers that I consider unrealistically optimistic, the best NOI I can arrive at is ~$18k (you could call it $20k if you like living dangerously and don't believe in reserves). 

It can be very dangerous paying for a listing without knowing what terms you are going to be required to agree to. 

At that moment we were just thankful to find a place where this family would be out of danger. 

I think the confusion lies in that distinction.

The distinction between which 1099 box the business reports the amounts in is irrelevant in determining whether these are subject to SE tax.

My dad thought that was a cute trick despite the danger.