We can not give you more advice outside of our area as our insurance does not cover them.

.- Being paid off and after all expenses, cashflow is $2,308/month.Here are Investment Returns after calculating rents; taxes; insurance; capex; maintenance etc.The columns are: Year 1, 2, 3, 5, 10, 20, and Year 30. 

I also own all of my vehicles so I have no car payments and low insurance.

As for the rest, there are major differences between Net Operating Income and Net Annual Income (or annual Cash Flow – which I consider the real measure of an investment performance, how much money puts in my pocket on a regular basis) and Cash on Cash Return on Investment.Net Operating Income is calculated before debt.Net Operating Income = Gross_Annual_Rent – (Vacancy + Operating_Expenses)Where Operating Expenses = Taxes + Insurance + Monthly HOA x 12 + Monthly Management Fee x 12 + Repairs and Incidentals (Warranty, Utilities if any paid by owner and/or during vacancy, CapEx reserves, etc., don’t forget the CPA and Lawyer costs) Again Net Operating Income is calculated before debt - what matters more is the NET Annual Income (or annual cash flow): NET Annual Income = Net_Operating_Income - Mortgage_PaymentsAnd that leads to the Cash on Cash Return on Investment: C/C ROI = Annual Cash Flow / (Down Payment + Closing Costs)And I’m willing to bet you don’t get C/C ROI above 10% on any SFR in Austin area (based on these calculations and bought with conventional means, not subject-to or assumptions, or owner financing or other creative financing).

Net income for the house after property tax and insurance is $500 per month. 

Once you have removed the doubt of a previous owner wanting to get their property back by saying the county didn't handle things to the letter of the law, then you can get title insurance protecting your 100% ownership then sell like any other property.If you have a lot of old owners or bigger problems the the quit claim deeds from the people you can find will help speed up a Quiet Title Action.

I don't love it because of the mortgage insurance if I put < 20%.

It's like insurance: would you pay every year a $1000 premium to insure your cellphone that cost $1000 and that you expect to keep 3 years?

If he did finance it this way to me, would I have the proper documentation to deduct interest etc?

Process looks good with the lender, however they are asking us this:o Did you make substantial improvements to the property and if so what were the improvements and do you have a builder contract or invoices to document cost?