My profit margin is smaller than I would like, but i feel like this is the best one I've seen so far.  

In the eyes of the IRS I believe I qualify as an investor and not a dealer which would have me pay capital gains instead of income tax.Now, the reality is that short term capital gains are still taxed at your marginal income tax rate, so it is still treated as income tax in that sense.

I especially like these cities, but anything with margin in it around the East Bay is good for me.

Or were the margins just too small to compensate for the unexpected?

In a perfect scenario you wouldn't have to pay the developer or GC his profit margin or the hard money lender his cut(have to figure in normal finance rates).

If you are happy with it, I might not take the risk of losing a good tenant, but if your margin is shrinking to the point where you question the investment, you've got no choice but to raise rent.

A marginal shift in your thinking, I feel will clear this up.When most people think about these things, they think - if I do this, how much money can I make vs. how much could I loose.

Its not too much different than being a real estate agent to be honest, your just dealing with off the market properties and don't make a commission but instead make a margin on how attractive the deal is to the end buyer.Really what you are doing is providing a service to people who need to sell their house quickly (or are simply very motivated to sell for some reason) and connecting them to buyers who are looking for undervalued houses and can close on these properties when the seller needs them to.

Always make sure the profit margin makes sense. $25 is a nice down payment amount.

We have done very well turning "tight" margins into a profitable experience.