It was my first home and turned into a fantastic rental as we upgraded.I would also consider when you upgrade to find something that could use some work; we bought a fixer-upper and have added well over 100k in equity because of it. 

For instance, if you're aiming for quick growth, a property rich in equity might be more beneficial than one that's cash-flow rich but equity-poor.

@Brian Christensen You can't really expect to have built in equity when you buy a turn key.

I believe you can refinance out of FHA if you already reached 20% of the purchased price in equity to get a conventional loan.

There are a couple of points astray with this scenario. 1st, your math is a litte off a basis of 252.5 with a current valuation of $325k doesnt get you close to 100k in equity.

well if you can find another rental in Houston for a down payment of 25k (amount you have in equity) and it cash flows at least $220 per month (890-670) then why not?  

. $1M in equity will generate $5,000 minimum net rental income.If you want $10K a month net rental income, one needs $2M.So the question for me would be: How do I create $1M in equity as fast as I can?

It would be nice if when I fronted the cash for the initial conversion, could the built in equity count towards my down payment, but that might be delving into fantacy. 

In addition, most likely they have well over one million dollars in equity.

I have a house with about $40,000 in equity, I have $6000 left on a credit card that I'm paying off.