The cost of sales would start to eat into your profits, though. 

Maybe consider a Kill What You Eat (EWYK) model?

They make stinky pee nests, eat electrical wires, and die in stacks when they chew into the wires. 

Maybe pay cash for a small property and use the remaining proceeds as the minimum downpayment on a property that would eat up the rest of the $600K sale.An $80K capital gain in CA is a pretty large tax. 

So the mortgage really eats into our cash flow.  

Once my first wholesale deal passes, I intend not to eat the profit, but roll it straight back into my business.I am considering a few things.1.setting up an S-corp (or LLC taxed as an S-corp?) 

We try to cut expenses anywhere we can, we eat at home probably 6 days a week, I do all the maintenance, manage the properties myself, etc...

The tax on UDFI  may eat some of that differential, but likely not all 3 points. 

I had never considered that the early withdrawal penalty didn't always eat into the interest significantly.

A property manager fees could eat you alive with the turnover you could experience in a 4 plex.