This allows for 45% of the effective rent to be spent on all your expenses (taxes, insurance, management, common area utilities, etc. - but not your mortgage payment), and gives you the net operating income (NOI).

@John Michael RobersonI agree with @Kory Reynolds: tax-wise, it is a workable plan, as long as you are hands-off, which in technical terms is known as failing material participation.I would caution however against focusing strictly on taxes.

If we crush the rehab I think we can even push closer to 200Cash-Out Refi Amount: $131k (75% LTV of the conservative 175k figure) Profit if done as a flip: 60k. (175k - 115k purchase price & rehab)Cash Invested: 18k (This accounts for $7,500 for down payment to lender, $2,000 in EMD to seller, lender fees, inspection, insurance, title, projected 3 months holding costs at $1000 per month)----------------------------------------------------------------------------If I do it as a flip, from what I understand, I'll be hit with a ridiculous tax bill (24% short term capital gains + 15% self-employment tax), leaving me with roughly $36k after-tax profit. 36 - my 18 invested leaves me with 18k increase to my net worth.

Then you could find yourself in a position where tenants are extremely pissed off, small problems turn into big ones, and you've created a huge mess that could've been easily avoided. 

Use that money to put down on a real piece of property that offers tax benefits, appreciation and less police traffic.

They seem to have a ton of experience and can help avoid some pitfalls  for a first time fund creator. 

To avoid going through the same poor experience, keep reading.Even if someone gives you a referral here, do NOT make the mistake of assuming that the PMC will meet your expectations, just because they met the expectations of the referral source.In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.It's often a case of not doing enough research, as they don't know what they don't know!

How can I go about obtaining a list of properties that are tax delinquent and/or have code violations?

As a specialized real estate CPA, I'm here to provide expert guidance on your most complex tax matters, from navigating 1031 exchanges and cost segregation studies to optimizing your rental property deductions and handling multi-entity structures.

Lastly, reflecting on your own journey, what are some lessons learned or common pitfalls that you believe newcomers should be aware of and avoid?