Therefore any property purchase should be able to generate a profit as an LTR otherwise the risk seems too high.  

One of my options is to sell and utilize the profits to begin my investing journey.

Take wholesaling for example...no one heard of it during it's most profitable years after the credit crisis. 

Nonetheless, even with their long experience, they often barely make a profit, which they say they don't mind - because their goal is to gentrify the whole neighborhood, one property at a time.

What profit margin is common? 

If you have ever purchased an investment property from a family member (or friend) or structured some sort of profit sharing arrangement I’d love to hear about it.

Figure another $1000 if cash, significantly more if a loan.Subtract the $25,000 rehab.Then subtract the $160k purchase.Looks like $21,000 or so in profit.

As long as I make a profit, I’ll be fine.

You "paid" or "offered" value for the note that is equal to the note so there is no taxable profit in the note. 

Getting a property at a discount, adding value through renovation, getting tenants and showing the bank a "seasoning period" then pulling your money out via refinancing allows you to get back potentially all if not a profit from that deal, and go find another one.