I have a partner, and he has gotten all of the paper work/licenses done, now we just have to actually get started. 

Make sure you pay on time, keep insurance perfect, head down, eyes on paper. 

Then after establishing a company and establishing actual cashflow and not just having it on paper, you could then try and find a partner who will come in and purchase the portfolio from you and your partners, you can pay off your partners and then start new with this single partner and move forward through the rest of the plan.

This is how you avoid liability, not by filing some papers. 

A $40,000 home may have better cash flow on paper, but it’s likely a dump in a poor area of town.

I am willing to break even for a vacation home, but if the property breaks even on paper, that stills scares me. 

This will give you an idea of what monthly payment you can afford on paper.

, or does it LOOK like an office that he's only in for 5 hours a week (few personal items, just a place he pops into 1-2 days a week, in this case the keyboard being dusty might be a good thing... empty trash can, no random papers floating around...)? 

Once you have more than 50 units, it is like death by a thousand paper cuts with the minor maintenance calls.

A less expensive property (eg bad area, house in poor condition) may be less expensive to purchase or even look better on paper, but in reality it is not.