They do not have to claim it as income - as long as it was not compensation for services but a discretionary personal money gift, completely out of your good heart and not out of an implied agreement.

Your question implies you have unknowns about a stabilized property, a property that already has improved NOI, and that you don't have unknowns about the bank evaluation for property acquisition.

I didn't mean to imply that disrupting the real estate industry would be completely beneficial.

What you're claiming implies below average results, which my theory doesn't predict. 

One other consideration, renting to families does not imply you have to accept more occupants than your local ordinances will permit.

She wound up working at a Nanny, a Waitress and currently, a Personal Trainer.

My wife was a trainer for Floyd ...

I don't mean to imply that all sellers are trying to pull one over, but it's a major purchase and worth taking the time. 

In practice, RE investors seldom invest in RE that is projected to be cash neutral which implies that in practice the rent collected covers the loan and creates some positive cash flow that is in addition to the RE appreciation.

I didn’t intend to imply that one causes the other.