Signing leases merely to sub-lease is not a business model and in 90% of residential leases is specifically prohibited. 

I have nothing more to add to what you already know or Joe has said except that I wouldn't let sellers dip into the security deposit for two reasons: First, you now have an unsecured unit and even if (s)he's a model tenant, when (s)he moves out you're going to eat a cost that you could/should have been able to pass on.

This is my biggest grip with the leverage leverage leverage model.

Though this is a good strategy, in general, it doesn't really fit the model for what we're trying to do.

Although I don't know if I agree that they can't sustain with this model. 

@Joshua Meade I got a lot out of watching Spencer Burton build CRE financial models on youtube, specifically his "Watch Me Build a Multifamily Real Estate Model" video and a couple others.

I have excellent FICO, really good income from full-time exec assistant job and lucrative but inconsistent part-time modelling and wanted to invest in 5-6 interesting properties.

The ones I model myself after were not aggressively over-leveraged and believed in the product location. 

I know there are a lot of worries but all business models have issues to overcome but with a great PM even the hardest issues are pretty simple for us to work through.I love REI so if you ever have questions or just want to talk let me know I love discussing investing.Best of luck!

You take a 1920's house to one and say "I want the whole thing redone" and I guarantee you none of them would ever say "20000 sounds about right"  I was a builder for about 5 years precrash and I used to tell people the base model started at about 75 bucks per sf under roof and we go up from there.