The downside is you will need to live there, for a minimum of one year (to satisfy FHA Requirements); AND because you closed personally, you will not have Asset Protection, in the form of closing in the name of a LLC.

outweighed the downside of the % of prospects catching it.

Actually, I'm not even sure there's a huge down side except that 20% can turn out to be a heck of a lot of money when you're just starting out.I'm not terribly worried about the ARM as I'm sure we'd just refi at the point it kicks in.

On the downside, there were two poor tenants, one reasonably good tenant, two vacancies, virtually no upgrades or remodels done beyond the absolute bare minimum over the last 25 years, and the neighborhood is poor (though not War-Zone status).

The only downside to purchasing it as a straight sale and get purchase financing would be that it would probably require cash from the purchaser - it would either be sold for above the current outstanding loan amount (and require a downpayment) so that the new loan would be a certain % of the purchase price, or as you mentioned, pay down the existing loan with cash during purchase so that the new loan is less and conforms to the LTV requirements of the lender.  

One downside I see to doing it this way is that it limits my ability to choose a tenant I feel may be equally qualified, but for personal reasons I think they may be a better fit to my apartment community.

That is the only down side of South Dakota - winter...

thank you BrentAs I said I am still reading and learning about the upsides and downsides of turnkeys.By giving away possible equity do you mean that I will buy a turnkey for a market value price and won't be able to sell immediately for profit?

MFR should have lower per-unit costs across the board so it made the PM cost more palatable and should improve our returns.The biggest downside I see to MFR is a lack of liquidity and less appreciation.

There is no down side to asking.