Are there times where people have and have not pursued this technique?

Locking in your profits of your primary residence may sound appealing. 

And they’ll use our profits from this property as income to approve us for our next property rather than having to wait the typical 2 years for it to be considered income.

This gives you leverage to either sell for profit, or refinance for cash out to do another deal.

Any profit split varies depending if your relative just gives you money or also helps you physically. 

I'm not against profit in real estate, far from it, but buying a property that needs improvements in a high crime area that was worth half the asking price 12 months ago is not a good idea and if it's run down, you won't attract "stable tenants" in a high crime area no matter what you do. 

If you can I would invest in a dilapidated home that you could Fix and Flip and resale for a profit from it and I would invest in a similar way or some other investment that would make you money.   

Update: Probably not going to pursue the property that needed this work for multiple reasons. 

This way, each month I don't need to set aside money for reserve, and I can then count the "would be" reserve money as part of my profit?

This is one of the most expensive parts of town so I was thinking this could potentially be a very profitable flip even though it is not currently listed for sale.