Now I don't think all cash out refinances should lead to profit, but I think most of them should.

Our strategy is a 3-5 year flip that when you add up the cash flow, the tax savings from depreciation, the mortgage debt pay down, and the fact that we bought it under market value and that we are selling it on a lease option so we don't need to pay realtor fees and have minimal closing costs, our average total profit over a 3-5 year period is round 60k per property that my partner and I split.  

There's a lot of red flags on this and I would personally move on.If you still want to pursue it after looking at their background and credit report, might I suggest  a higher security deposit or pet fee up front.Still, there's always better tenants out there for you.

Cash buying - which is one of the least profitable ways to invest.

To get started I recommend reading @Gino Barbaro book (wheelbarrow-profits).

The only reason I asked is that bringing in partners to the table will dilute the profit margin.

There is an unfortunate practice now of "appraisal management companies" shopping for appraisers by price, going with the lowest bidder and taking a huge cut of the profits.

I wouldn't take on the construction risk if there was no profit to be gained.

If my area doesn't have the best market, but I find a good deal, should i still pursue?

She would get the primary residence exclusion of the first $250K of profit tax free if she has lived in it for 2 out of the 5 years immediately prior to sale.If it's a rental now then you can do a 1031 but she will not be able to move into one of the properties for a year or two since the 1031 is for the sale and purchase of investment property only.