I know, there are plenty of red flags there, but I do believe it is worth the risk when I consider how happy it makes my wife, how life-changing it will be for the family, how minor the financial impact will be on me, and how it gives me the opportunity to practice the steps of real estate investing with forgiving tenants.Finally, I am going to attempt to self manage as nothing comes close to cash-flowing if you include PM costs.

Don't see any major red flags here, so long as you are comfortable in the low income space.

Gaps in rent payments or undisclosed tenant issues should have been red flags.It’s good to see the OP trying to help their client navigate this, as acting promptly is critical for any chance of recovery.

One of the biggest red flags I have as a lender (who lends my own money as well as secondary market loan) is when a rookie tells me there goal is to buy 10, 20, whatever properties in the next year. my next question is how many do you own currently?

Quote from @George Red: Hey @Steve Johnson, I found your website but it does not explicitly mention HVAC and I actually was about to ask on the forum if anyone had a recommendation for a furnace repair job... not a big job, one unit in a duplex not working properly.

People probably do this all the time, but skirting the law and subject to red tag if the city finds out. 

He would show up, realize he didn't like the view of the water tower half a block away and back out.- Getting under contract and then reducing the price because of findings is common, but major reductions are likely to tick off the seller unless you have strong justification.

A common strategy used by investors, such as those operating through PadSplit, involves purchasing the property, completing basic rehab, refinancing, and then using cash for the interior build-out.Another potential red flag, even without converting common areas, is the addition of individual locks on bedroom doors.

One market shift and you're in the RED. 

On the other hand if they are a sponsor that is experienced in stopping a skin in the game, that's a huge red flag for me.c) how open to scrutiny are they?