It is very unlikely that you'll have problems/be investigated for just one instance, but repeatedly doing this will absolutely raise red flags these days.

I was shown about a handful of their holdings in the Houston, Memphis, and Little Rock markets, but the cash flow and CoC returns were less than $100 per month and 2-4% after factoring in additional expenses like 7% vacancy and 10% maintenance per month to go along with 20% down and conventional mortgage.

If it's a matter of a quarter point but the more expensive debt is with a bank that offers better other terms like amortization and LTV, and they have a rock star loan officer, I'd go with the slightly higher interest rate product.2.)

Yes, the contractors were bad people, but there were hundreds of red flags waving in your face and you ignored them all. 

Qualify the contractor and highlight the benefits of working together which would include consistent work for them and regular paycheck.Personally, I'd buy the materials and never pay any money upfront, a "red flag" on its own.

Labor, supply chain (we are on an island) and red tape: from offers and closing, to funding to permits.  

That extra cash flow isnt safety, its the market signaling with a big red flashing light, Risk.

@Ryan Knoetze As far as I know, these are the areas (in red) https://cdn2-img.pressreader.c...I just read some news saying they are now allowing new AL licenses BUT only for 5 years, after that they will re-evaluate them and decide wether you can keep them or not.Also, regarding taxes, if you apply for an AL license you should declare your rental income under category B, this type of activity receives a special treatment under the IRS and tax is calculated on sales, in other words you are only taxable on 15% or 35% of your invoiced income, depending on the way your business is structured.Capital gains are not charged if the property is more than 30 years and you refurbished it or if it is located on an urban rehabilitation zone.

If you can't close fast enough or has too much red tape, then you lose the deal to others.

I just paid my attorney 15k today in just fees for 4 entitlement contract red lines and we arnt even under contract yet!