Operating expenses include taxes, insurance, paid management, maintenance, office supplies, advertising, legal fees, court costs, fuel for your vehicle (or mileage), some vehicle expenses, some education expenses (possibly depending on your business situation), etc.

So are we seeing the end of rehabs or do we still have time.I am tired of working for other people, I am 31 and wish to have finacial independence.

In Massachusetts (I get tired of its absurd rules) you sometimes need to give 6 months or more notice to certain people, living in certain buildings, under certain conditions.

Operating expenses also include management (whether you do it or not), maintenance, advertising, vacancy allowance, office supplies, legal fees, evictions, court costs, utilities paid by the owner, lawsuits, fuel for your vehicle (going to and from you rental), damage caused by tenants in excess of the security deposit, etc, etc, etc.

If you can find a worn out, tired landlord you may be able to negotiate his monthly rent cost by giving him a "worry free" lease meaning guaranteed payments on the 31st, no repairs in the middle of the night, no one calling him fussing about stuff, basically eliminate most of the hassles of the typical landlord position.

Also, in areas that have a high probability of positive cash flow, you often sacrifice being in a highly appreciating market.So, if you are only focused on positive cash flow, you will be paying the IRS a good chunk of your money, and you will be short changing yourself on appreciation.According to this book, appreciation is the best vehicle for wealth building in REI.

I've sent a yellow letter and then 2 form letters describing if their house meets certain criteria about needing to downsize, tired of upkeep, need to cash out on equity, etc.

You need to understand that agents have to deal with a LOT of tire kickers so if you don't have an existing relationship with them, you most likely will not be their top priority.

For the investment vehicle to use, I was thinking of ITB which is the US Homebuilder's index ETF for house construction projects, and REZ, the residential equity (i.e. home rentals) REIT index ETF.

I will leave you with this conclusion to my post, the reason I personally pursue loans as a vehicle for investment is because I simply love the complexity and the amount of moving pieces that are involved.