Instead of using Yellow letters printed handwritten letters, I cut a yellow steno pad paper into thirds and hand wrote each letter. 

If you on the other hand, have plenty of time and desire to spend on RE as a business, then decide on your niche, educate yourself first, and take action.

I get my letters printed by a local printer and then hand deliver door-to-door.

For example, your monthly sweep to reserves is not an expense - it is just a balance sheet transfer. 

I also have a small 401k that I am trying to figure out how to use whether it means closing it out and taking the hit or finding a way to transfer it into a Roth self directed.As I said I am really grateful that Bigger Pockets is here and have just been diving in the last few weeks since discovering their Youtube channel.Thanks Ya'll!

After adding brokerage, transfer tax, title insurance as well as accounting for any capital expense to replace 20+ year old mechanicals/roofs etc.  

Even caught red handed you would be way ahead and wouldn't have to go through all their non sense permitting process and very likely wouldn't be fined if you retroactively comply with their inquiries.

In addition, my co-worker is being transferred in 4 months and wants to rent the same property from me after i buy it.

I assume you are using a title co. or attorney.....funds(no checks) are transferred to the title co.

If updating the interior or exterior will allow you to increase rent and get paid back in "x" number of months, I would do it.On the other hand if you have good solid tenants I wouldn't mess with anything.Since your grandfather had these for 20 years some of the tenants may be due for a rate increase without any improvments