Make sure and carry adequate insurance with high liability limits no matter what your situation.A final thought.....and I don't have first hand experience in getting sued but knowing others who have (in Florida), it is very unlikely that a judge will force you to liquidate a property, especially one encumbered by a mortgage, to settle a lawsuit. 

I know a handful of long distance investors who have purchased a few properties in several markets...I wonder their rationale on this.

If you have little money to work with, then use your time... post ads on Craigslist, attend your local REIA and any other Meetup groups, network, door knock, do Driving for Dollars, hand write and stuff your mailers, etc, etc, etcIf you have the money but not the time, then you pay someone to do the above things.If you have neither the time nor the money you won't make it very far...

I live in Texas and am working  on using the equity in my home to get a loan and construct a garage apartment to rent out and try my hand at land-lording. 

To my understanding the banks don’t usually show the house and you’d have to buy it “as is” but how do you know when you have a gem on your hands or fools gold?

On the other hand if you purchased wrong your debt repayment and expenses could show no profit. 

Your hand sketched graph shows a climb followed by decline, followed by another climb.

This data is first-hand, from the accounts I manage.

Now that I have my first deal under my belt, I’m looking for my second Multifamily so I’m hoping for a crash or at least a dip in prices so the buyer has the upper hand.

Was this a contract for deed, sub2, when did title change hands, etc.