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.

Great info above and an important reason to make sure that you audit all leases during your DD period.

Easier bookkeeping, easier doing taxes, easier if there's an audit. 

I may not be impartial on this subject but I think that one of the best ways to get started in real estate investing is to rehab a house that you are going to live in.

If you never buy a property and get audited your auditor may see it a different way but hard to dispute if you do purchase a property in the near future that's how it was explained to me but please take this with a grain of salt as I am no Accountant.   

I used to be in audit but now do consulting. 

Furthmore, if this investment property is ever audited it will look as if I'm hiding income..

If your audited by the IRS or your state, you'll want clean a clean accounting trail showing your income and expenses.