I understand that the rules would help you determine if the property cash flowed and that the 2% one was used first, while the 50% was used more like a final factor (in the example).What doesn't make sense is why the property was deemed a bad idea, wouldn't the fact that the 50% rule gave 0 cash flow (rather than negative) mean that the investor would still be able to make money on loan pay down?

They are usually worth every penny paid.  

@Nick Rice I think all chris was saying is that the market as a whole right now is pretty hot, and there are bidding wars going on, "almost" everywhere, and when a buyer comes in with a FHA loan nowadays, usually there is a couple other bidders already bidding on the same property with 20%, 25% down, maybe even full cash, so the 3.5% down offer to a seller is a bit of a last option.  

They're usually used to working with investors and eager to give you a better rate than Joe Homeowner because it's easier to work in a vacant property and I always promise repeat business if they do the job well and within budget.  

Those properties are still cheaper than Los Angeles multifamily properties and their cap rates are usually much better.

This deal looks like either a no cash flow deal or possibly a negative (because I don't think you will get 4% loan on an investment property).  

Usually If the property is brand new, the builder will provide a warranty.

And the tenants habits are usually the same as they were in the past.

He usually has a very informative presentation from a guest speaker, And if you're looking to make connections there's almost always agents, lawyers, and of course (very) seasoned investors in the group.  

However I have only lightly looked around on sites like Trulia, Zillow etc. and I have heard that they usually aren't the best resources compared to having a real estate agent with the MLS.