That means it takes forever to pay off the mortgage meaning you're paying a mountain of interest. 

Typically this means they will take longer to close, may not have all the information for the companies they work with, and most hard money brokers get their money by taking an existing product and adding extra points to pay their fee.What is your investor success rate?

Separate issue is only 13% of CA homeowners pay for earthquake insurance because it's so expensive and the deductible can be really high.What are your re-building costs in your area?

I was told by a local experienced investor that insurance companies will always go cheap with paying out to contractors in the event a property needs to be rebuilt. 

A longer timeline will make paying the extra 2% now more attractive.

Risks: rates go down and you have to pay a prepay of 2 or 3 %; you have to sell and pay the prepay; rents decline & you can't make the payment like any other type of loan; cost upfront a little more than conventional; need to find experienced broker licensed in the state where subject property sits; servicers are bulldogs. 

Thanks, it all sounds good as long as I can avoid paying hefty taxes and generate cash flow.

One would think that a bidder would pay $45,000 in my example (since they are assuming the first mortgage), but they are actually bidding $225,000.

You can't directly do something to allow you to sell the flip, and buy the triplex without paying gains. 

Finding tenants to pay your bills is the hard part.