The only way to know if your idea is worth doing from a wealth building standpoint is to do the math:  What is the cost to acquire?

Purchase price: $265,000 Cash invested: $200,000 1930’s historic home with a converted garage.

It is much more difficult to sell an entire portfolio that has become uninsurable (which would require a cash only sale) or that insurance rates are so high that no one wants to buy. 

Cash flow is definitely the biggest challenge; both in terms of finding properties to buy that cash flow with a loan on them and just company wide given interest rates and labor/material is up and, at least where I'm at in Jackson County, MO, taxes are way up too. 

I'm terrified of doing all this research, finding a "dream" property, only for it to fail and negative cash flow. 

One thing I'll add to an off-market deal is you might find a seller willing to do seller financing.You said, "I don't think the time exchanged to manage SFH would be worth my time and the cash flow most likely wouldn't be reasonable enough to hire a property manager.

You will get way better loan terms than you would on a Cash out Refi as a partnership entity with no RE experience.This is all very theoretical, can you share the actual numbers so we can help you more?

The cash investor who "saw the property on zillow" but doesn't really understand what REO means or how the banks operate. 

We walked through a property that we went into thinking we were not going to like it and we ended up loving it and jumping on it pretty quickly after because the seller was getting other cash offers and the price/location/set-up of the property just fit our situation well. 

I purchased both as a package and for the next six years enjoyed great cash flow as I paid the tax on the house lot annually at about half of what it should have been and neglected to pay anything on the tennis court lot.