Apparently they purchased this property March 2016 and only began what I would barely call bookkeeping this past October, so I have 4 months of notes that cash, checks and money orders were received.

And a post or two on the subject will barely scratch the surface. 

This is a bare life estate.

Most states have bare minimum information and language that has to be included in lien documents in order to be enforceable, so you don't want to lose all your capital just because you didn't feel like paying an attorney $1000 to draw up documents protecting 100k+ plus in capital.

Matt Solis@sellwithsolis on IG

Large enough to handle the worse-case scenario (many missed payments, major damages) and still turn a profit. 10% would be the bare minimum. 

Option A and B are likely initially cash flow negative when you include vacancy, maintenance, Cap ex, miscellaneous. 

The decision was based on 1) what debt service ratio we could achieve on my income alone, which we felt was safer, and also 2) we felt that having higher cash flow (not very high, just not negative or barely positive) was the wiser choice since we intend to hold long term.

I suspect the RE prices to have barely moved. 

Quote from @Matt Solis: Yo @Brandon CraigAt best you would be able to break even if you turned a 600k property into a LTR, but you would need to rent out each room invidiually to make it work. $700 per room for a luxury home is not too far fetched, which would put gross rents at $3500.