My thinking is that usually with a mortgage you see the interest paid as a single entry and that entry on the statement is the only asset covered on the note and easily transferred to a tax return but if Kyle uses his HELOC like most and on same credit line, he pays for CAPEX or repairs before he has a separate account built for those items from proceeds, what added measures might he have to incorporate into his plans to avoid red flag audit by ensuring his records reflect the proper amounts? 

Our loan auditing process which would include a new appraisal with an acceptable variance of said 10%. 

Business tenants will audit this reconciliation and push back on charges they don't think they want to pay.I could go on about more of the differences and what is involved with commercial property management but then I'd have to charge you hourly for consulting fees ;).Concepts for you to research: CAM, CAM reconciliation, gross leases, net leases, E&O insurance, service contracts, trust fund accounting, MRI, Yardi, and local licensing laws.Not a lawyer or tax professional, the above is just my opinion and not advice.

The purpose I believe is to have a more experienced managing broker audit your contracts written over the 1st 2 years.

The bank was audited and since I had a rental insurance policy on the property they questioned why I wasn't living in it.

Upon audit of a short sale I have seen where a bank reverses a short sale approval as well.

This is pretty much why I wouldn't buy a mature company, I would buy the assets but the name and history of a mature company would need to be valuable, clean and auditable for me to consider it and suffer the brain damage.

my follow up question is, assuming an audit by irs where to take place, how would the irs determine, or ask you to prove, your primary residence?

Yes others want the PM and repair person and a parent PM company auditing and watching over the repair person and the Pm at the building complex.How many controls you put in place will depend on how busy your life is and how close you are to a property or not.Yield works like this.In 5 plus properties you can structure like this.Say you have 250,000 down.At 25% down you can buy a 1,000,000 propertyAt 15% down and then have a seller carry a 10% second 1,670,000At 10% down and then have a seller carry a 15% second 2,500,000Hope it helps.The cash flow will be determined by how you negotiate that second for rate and term with the seller.

I appreciate auditing each others numbers.