What are the main criteria that I should focus on while purchasing a mortgage note. 

Main question, how much debt should one carry to acquire more property, if any?

Jason,That's my main point.

I found out from other tenants that she tampered the main electricity meter box to turn the switch ON on her unit.

If they are kept inside all the time they can do massive damage to a unit or house.I am mainly convinced that mid to high end residential rentals throw off very little cash flow and it's more about the appreciation boosting the overall returns.Good Luck.

Since this will be our first investment, our main concern is cash flow.

This is one of the larger empty commercial lots very close to a highway, but just behind the main street. 

There aren't many 2 car garages in the area that are this usable (some are mostly unusable).Initial Repairs: $7-10k (mainly new paint, carpet, lower cabinets in the kitchen, glass block in basement and upstairs bathroom, updating bathroom)Expected Rent: $700/mo (probably doing Section 8)Expenses = $310/mo (based on items below).10% Property Management: $70/mo10% repairs/maintenance: $70/moRE Taxes: $35/moInsurance: $57/mo10% Cap X: $70/moI've used different real estate calculators but since they ask for the information differently I seem to be getting different numbers for my cash on cash returns and cash flow.

The main thing is to be proactive and transparent- hire an exterminator to come and secure the property from any intrusions and set traps as a precaution (be proactive - rats and mice will always find a way in if there is one).Try to get an idea of when construction will end or at least when the demo phase will end.

My own work has not had dramatic fails, mainly because I don't rush it.