My question is what records should I feel comfortable in asking the seller to produce, so I can do diligence. 

It is all made up - a lie....Unless he produces the paperwork.

One day I was brainstorming, and I remembered that my parents have a rental in Farmington NM, that is just sitting vacant, that they use as a storage; trust me I know, its crazy to let an investment that could be producing cash flow, just sit and do nothing. 

What are you doing in California with the cheapest property value being almost $300k-$500k to produce enough income to put down 20%?

There are so many reasons why newbies should start their RE investing local.Finally I question if Midwest RE investing is likely to out produce the historical 10% return of the S&P 500. 

I have no debt other than the mortgage on my one condo, but the income it produces far surpass the monthly expenses. 

The returns are only 50% of what leverage could produce.

@Jim JacksonJim: You have "California" investor problems ... lots of equity and no cash.Refinancing the buildings would still leave you with 3 properties that don't produce cash.

My goal is to own a portfolio income producing properties that builds over time.

Not income producing debt, I am strictly talking small payment debt.