Waiting to show proof of cash flow will put you in a better position to refi.

Bill,With a REO (as with almost all listed properties) you'll have to show proof of funds if it's an all cash offer, or a pre-approval letter from a lender if you intend to use financing. 

I like collecting rent while renovations occur, but it does complicate things.  

When they send me proof of funds letters, my business name is on there.

small deals are very difficult for investors.. because as stated if something goes wrong the cost of collection could exceed the investment.. rip it off of a credit card.  

Property is ready to go with tenants and the investor don't have to do anything but collect rent.

I would call that middle class at least, and that's assuming 0% interest on that initial $3.5M.So, you're ***-u-me-ing perfect health, no injuries / accidents, no natural catastrophes (hurricanes / cyclones, wild fires, volcanic eruptions, ... at least two of which are common in HI), vehicles which last forever and never need to be replaced, destruction-proof housing and furnishings, ...... and if you CAN live that lifestyle in HI on $100K / yr (most people can't in ANY state), why are you not teaching personal finance at the university level? 

.$25,000 surety bond.Copy of lease for location or proof of ownership.Dealer training seminar certificate.Registration of fictitious trade name.Copy of corporate papers.Sales tax number.Federal employer identification number.Fingerprints and applicable fees. ($54.25 per person).I emailed the DMV to see if I am permitted to use my home as an office.The response was (and I am happy to have it in writing) You can be a Broker in your house as long there is no zoning issues.

It may be extremely difficult to collect from them if they end up owing you money.

Keep in mind that the auction process is just part of the legal requirements for the lender's collection activity of last resort - and that the auction process is somewhat designed so that the lender can "solve" some of the issues by following proper procedures (for example, IRS liens can be left with just a redemption period if proper notice is given to the USA that a foreclosure will happen and extinguish the IRS lien).