They approached me asking if I'd want to lend them money so they can pay a down payment and show some cash in the bank for reserves in order to obtain a conventional mortgage on their next deal.

Reserved parking spot for the unit.

You will have things go wrong with the property and you need to have the reserve to weather the storm, and if you can get a property that can weather the storm for you through proper analysis, the better off you will be and the better off your investment portfolio will be.

I will have some income from the reserves (20k ish a year) and with some luck will have a new job as a real estate agent.

However an account for reserves - cap ex etc is a good idea. 

As you know cash reserves are very important and larger buildings take time to implement a plan.

If you have reserves to weather these issues and the properties help you meet your goals then go for it.

You have the right to cancel the reservation with no refund for rule violations.

However, the less cash-flow the greater your reserves should be to mitigate your risk. 

At a 75% LTV purchase (standard non-owner occupied LTV) you can afford just under a $400K property with no reserves from the money extracted from your home.