@Ethan Smith - You have described a property with a 24 CAP.

Had nothing to do with real estate but that mantra has stuck with me and I’ve enjoyed it here in regard to REI. short term its been great as described above and longer term on my first deal rent went from $1700 to $1750 with next tenant and that tenant took an increase this year to $1775.

They have exceeded 30% IRRs with this model in several deals and have successfully done 55+ deals to-date.So, if you are going to borrow short to invest longer term you may want to consider a syndication deal that uses supplemental financing with strong value add to refinance and return investor capital over the shorter term as described in #3.

I hesitate to consider buying rentals/turnkey properties as passive, residual is a better way to describe owning rentals as there are things an owner needs to handle. 

Two thoughts come immediately to mind:Unless you can articulate in excruciating detail why your friend is so motivated to get away from this property, and then describe in detail your solid plan for addressing all those issues, you will BE your motivated seller friend in a few months/years if you buy this thing.I would aim for buying subject to existing financing (search "subject to" here on BP), rather than via "lease-to-own" or JV: It's generally cleaner and simpler.

You are 100% correct when you describe how to calculate that formula. 

I would find a cheaper property or better financing at a lower rate, but I would not do this "deal" as you've described it here.

The credit Unions I've spoken to in CA describe this as a slam dunk loan that any CU would love to take on.

Can you describe the property a bit? 

At best what you are describing is a second home, but most likely you would rent it so its not liablity.