Developers make money on top of what they pay builders, If I were to hire a builder directly you would think I would retain the "sweat equity" that normally the developer would take on top right?

Don't sweat any deal.

Every flip is like peeling back layers of an onion, but this one came with tears, sweat, and the occasional scream into the void.

The most effective way to do this would be a basement unit, as they tend to cost much less than backyard cottages ($50,000 - $150,000 is a good estimate for a basement unit build, or way less if you throw in sweat equity or cut corners, while a 700+ sq ft backyard cottage will usually cost you $200,000+)Right now I like Kent/Des Moines (because of the upcoming lightrail stop), Renton & Everett (low prices, good multifamily opportunity), Tacoma (wonderful place to live, few good jobs, but may be revitalized further by upcoming light rail stops and more companies switching to Work From Home), and the Beacon Hill and Hillman City neighborhoods of Seattle. 

Part of that, I am convinced, is that they need to know their landlord is not too good to sweat and stink under their sink when they're in trouble.

The buyer got an affordable home in exchange for doing the repairs himself (sweat equity), I got a cashflowing note, and my private lender got a steady interest payment.

@Nate McCarthyProfit Splits and Contributions:Dividing profits proportionally to investment (2:1:1) is common, but you could also account for sweat equity if one party is doing more work.

On the other hand, I have seen out-of-state investors purchase properties that do not meet the 1% rule, opt for self-management, engage in sweat equity, and still achieve great cash flow.For a specific example, any listing from the market could be used.

Welcome to the university of real estate investing, I say.I am putting in a lot of my own sweat equity and that, alongside with business meetings with the wife, networking with other investors and all the communications with my real estate agent, insurance agent, lenders, contractor and subcontractors, are accumulating to the point where I can likely achieve the 750 hours of real estate work required to designate myself as a "real estate professional" on our next year's tax return.

Don't sweat it @Shane Willcox !