Guy Hi Guy, I'v posted this before as there are so many folks investing out of state but it is worth repeating.....Investing from out of state is challenging but if set up correctly, it can be a great way to reach areas that can give you a better return.

@Troy Schwamberger you are correct. the 1.2x is a bank standard for lending, even if you are at 1 and not bringing home money, you essentially are making money. your tenants are paying for the house ( adding equity) the bills are all being paid for to run the property, pay insurance and taxes. you also get to depreciate the property and if you do any improvements to the property or repairs that gets deducted or depreciated while adding to the basis of the property, if it is a capitol improvement.

However, if my understanding is correct, we could actually sell, without the time constraint and rules of a 1031 and still not have to pay taxes on the event, because of the fact we occupied the property as our primary residence two out of the past five years.

Your correct, my market is very hot.

Is that not correct?

Assuming my investment was paid for in cash and also assuming arv numbers were correct.

2) If I understand #1 correctly, after the investor receives the $3,000, we then split monthly income 70/30.3)When sold, he gets his $50,000 back, plus 70% of appreciation4)Management fee of x% of gross income on the year?

You can flip anywhere as long as you do your math correctly. 

Hopefully this will clear things up:You are correct with your understanding that you can't write off any costs related to inventory (the house) - whether that be the cost of the house, or items to improve the inventory (like lumber, paint, contractors, other flipping expenses).However, if the cost does not relate to the purchase or improvement of inventory (the house), it can be written off as operating costs, as you noted.

Aaron is correct about investing in other areas that are local that are outside of Port Arthur proper.