I estimate we should be able to cash flow ~$400 per month after 10% for Cap Ex, vacancies etc set aside. 

Loan Costs, Deposits, and Escrows: Origination fees, application fees, third party reports, legal, insurance review, title & escrow, rate caps (floating rate loans), due diligence deposit, rate lock deposit, standard escrows, etc.6.

I'm under the impression that its ran similar to single family homes and like cap rates for the large multifamily.

If I stopped the example here, most would say the portfolio of $100k homes is the better investment.Next, let's assume you decide to sell the Market B homes in year 3 because you are frustrated with the cap ex and management of the tenants in the lower tier houses because you are not achieving the expected cash flow.

I assume pros are little maintenance, no cap ex for maybe at least a decade, and possible favorable loan terms from developers. 

Thanks for the reply :)  Are there rent caps in California? 

If the rent is $3,500/month and you have around $300,000 in total costs (purchase + rehab), you’re looking at around a 10% cap rate assuming financing works out well.

Some sponsors tried to mitigate the risk with interest rate caps but these can't handle unlimited rate rises, and some found that their strategy blew up on them. 

This can be cap ex to the building's common elements or cosmetic like a new lobby that you as a landlord may not view as a worthwhile investment but the owner occupants may.

@rick taxed at short term cap gains I intend on keeping till 1 year markYour other questions I’ve answered elsewhere in the thread