Look at rental rates, vacancy rates, and typical property taxes in your target area.

There are expenses other than just the mortgage costs (like taxes, insurance, utilities, lawn care, maintenance, etc) that would have to be taken into account. 

I’ve looked into tax foreclosure, mortgage foreclosure (sheriff sales) and buying properties that are listed on MLS to flip.

I'm also pretty sure that 2 of the tenants are getting government assistance and I think they are longer term tenants.After taxes, insurance and with the owner paying for heat and water the owner claims it is netting $20,000 per year.

Would look for offlist Tax sales of 20 acres or more.

Other markets I'm considering are Nevada and Arizona, which have lower property tax rates and higher appreciation than Indiana. 

Although that money would be tax free it puts you in a tougher position down the road and you may even have to do a cash in refinance depending what your property appraises for.

Will we lose the primary residence capital gains tax advantage if we transfer the deed into an LLC?

Can she qualify as a real estate professional under IRS rule to reduce tax burden on my W2 income? 

Using a 1031 Exchange we were able to defer capital gains taxes and upgrade to the VRC.