Mind you we have to save for insurance and taxes since the mortage does not escrow it, so we're talking about an extra $600 a month in expenses. 

If you're making thousands on that deal, that $500 "loss" to you now, could be tens of thousands of lost profits in the future if you burn a bridge and they start giving all of their future pocket deals to other investors.

In the end we will have about $20k in extra equity, but we will have great cash flow and after 4 years the property will be owned free and clear and bringing in about $1,700/month.

Make them sturdy, tenant proof.my wife is from Puget Island and was born in longview.. and then owned a C 21 there for years .. its a very tough tenant base its not Portland or Vancouver.. you need to know that going in.. and adjust as stated above your expectations for tenant quality extra.. its kind of perked up since PDX has gotten so expensive so its the next closest town that is much cheaper..  

I'm actually in your situation as well but I will be trying to pay all 20% of the downpayment to avoid having to pay extra for P.M.I. insurance. 

Are there extra obstacles in doing this with the property coming from a TKP?

One thing we did was choose to go with 15 year mortgages over 30, and still pay down extra if able.

When we got promoted or got a re-enlistment bonus, we'd set aside the extra money instead of spending it, and that would go for down-payments.We also bought newer houses so that renovation was not a concern to us, and then we used a property manager. 

Is it monthly management fee, plus an extra fee for tenant turn overs?

This also works with a home (ie you rent out the extra rooms to roommates).