In some cases it may be more appropriate to form a general partnership for the deal.

Make an income/expense pro forma with conservative assumptions for all of the concerns you listed above.

If my friend and I form a legal entity (LLC), will we be able to get a loan from the bank in that entities name?

Problem with a lot of the out of area investors was they did not have the benefit of buying form a team member on the ground and by the time they paid Aussie marketing company US wholesaler and retailer etc etc. they were already paying 100k or so 2 years ago for the same house you and I bought for 50k..

All the forms are written by MA lawyers for MA landlords so you know your backside is covered. 

Could you just form a Solo-Member LLC that's a holding company and has the 401K attached and if you ever need to have a business that needs to hire employees make sure it's a separate LLC set up with the holding LLC being the sole-member of the separate LLC? 

You'll probably want at least 8% on actual financials (that's another thing, that 5-7% is probably a pro forma cap rate) if not higher.

Seeing as how you can borrow at least $100k on your primary (soon-to-be investment) property, I advise you to ONLY use those borrowings toward ACTUAL deals, not pro-forma education*!

@Richard Dunlop  I think the tenor of the OP  was what markets will double in a year... and the assumption was what markets could someone basically buy on the open market at fair market value and see their property appreciate by 100%... not buy distressed assets or some wholesale deal were someone ripped equity form a seller.. but a market that will just double. while this may happen somewhere but not likely... your correct though in many markets its not very hard to find distressed assets day one that are worth ( to some one) double what you paid for them... eaiser for sure in the rougher neighborhoods as you have abandoned homes burned out landlords etc...

Pro forma model just hitting the market cap rate, bad area, old property, 5 year old or less property, High vacancy, small units, poor unit mix, no amenities.