If rents are $500 we are talking a 10% reduction.

Is it a free weights specific workout or what kind of a workout do you put in?

Does this factor in purchase price, holding costs, renovation costs, reduction on gain from selling expenses ect? 

Just thinking out loud here, I think there are 2 scenarios: 1) If your borrower would not have enough funds to close the loan without a partner, but brings forth an attractive property, you could come in on the deal as that partner, without having to cut down interest rates - you could just have the borrower pay their fair share of the payments (whether those are deferred, or not). 2) If your borrower has enough funds to close the loan with you on their own equity, there would probably need to be a reduction in the interest rates, and/or more flexibility on deferred interest payments in order to get in on that deal as an investor, on top of being their HML. 

I then took that data and calculated a weighted average of what a property owner would pay with 10% rent and one month's rent at turnover.

In terms of investment offerings, property locations are weighted heavily toward Judicial foreclosure states (CA, NJ, NY, etc) which I refuse to invest in due to the associated risks. 

@Travis C. a good wholesaler and a good Realtor are worth their weight in gold when you have them bringing you good off market deals and pocket listings and deals just about to hit the MLS.  

I liked that you did significant risk reduction and went for a slam dunk and was cautious with the first one.

On one hand you don't want analysis paralysis for your first deal, on the other hand you do need risk reduction activities because nothing sucks more than losing a lot of money on your first deal.

As described in IRS Pub 523, there are some instances in which you can qualify for a reduction of the maximum exclusion, even if you do not meet the two-year use test for a primary residence.