I bring this up to simply illustrate the point that having a good answer to the capitalization question, and a track record of closing deals and not being a pain in the you know what is what gets you deals. 

To better illustrate these risks, you can look at the story of Dole Foods in this Bloomberg article. 

Links to cases & articles:Fackler: https://casetext.com/case/fackler-v-commissioner-o...Balsamo: https://www.leagle.com/decision/198766254cutcm6081...Gilford: https://law.justia.com/cases/federal/appellate-cou...Murtaugh: https://www.leagle.com/decision/199714974qtcm75113...Grier: https://law.justia.com/cases/federal/district-cour...Chicago Law Journal Article: https://chicagounbound.uchicago.edu/cgi/viewconten...Other relevant reading not mentioned above: Anderson: https://www.leagle.com/decision/1982134944jptcm130...Curphey: https://bradfordtaxinstitute.com/Endnotes/73_TC_76...Alvary: https://casetext.com/case/alvary-v-united-statesRevenue Ruling 73-522 (no link, also language is not quite the same as 162, unlike other links - but illustrative that triple net lease may be a problem)Good Article: https://www.taxnotes.com/tax-reform/economic-analy...Good Article, mentions "Kissing Cousin Issues" as one of the other posters here pointed out: https://www.thetaxadviser.com/issues/2013/may/clin...Another Kissing Cousin Article: http://www.mntaxclass.com/files/RRETOB_Part_I.pdfEnjoy!

You're analysis is right from a very high level, but there are many lower level costs that you're not considering, that Bart illustrated.

@Zack KarpOk, so here’s a few numbers to illustrate:- 203k to purchase a home for $50k- another $50k for the renovations for a total of $100k- $3.5k downpayment. - ARV is $200k

I think it's good to understand your multiple exit possibilities (including the bad ones) and illustrate them to the investors. 

I can make the obvious assumption that many of them have seen the guru ads who make it sound like shooting fish in a barrel and believe it will be an easy way to become an investor without money.As illustrated many times before from a wide range of experienced investors the path to a successful wholesale business requires a good amount of capital to spend on marketing which most newbies do not account for. 

Perhaps an illustration is worth a thousand words.

It is absolutely appropriate, because it illustrates what happens when reserves are not saved up for.In many states, including WI, laws have been enacted that require HOA's to keep adequate reserves.

If the property rents for $500 per month, and assuming you had no other expenses (not true, but for illustration purposes), you are going to show an annual income for that property of $2,560 instead of $6,000.