Doing the latter means that returns are more related to the individual investor's abilities, more intelligent, experienced and savvy investors will simply blow away the average.

I am assuming the owners know you are going to rent them out, not live in all 7 houses.If you have the ability to buy them in 12 months, and they are this good of a deal, I say rock and roll!

Do you have the ability to bring any capital to the deal?  

sense it seems like I will be focusing on small cities and towns, I thought it may be a good idea to get an idea of how well a community could survive another financial upset. I am thinking that two prime indicators w...

For example :Buyer shall have 15 days from the date of binding agreement (“Financing Contingency Period”) to determine if buyer has the ability to obtain a loan with the following terms:* Loan Amount: 70% of the total purchase price of the property * Term: 30 years * Interest Rate: No Higher Than 5.25% * Loan Type: FHAThis agreement shall terminate without penalty to Buyer if Buyer is unable to obtain the loan described above and notifies seller in writing of this event within the Financing Contingency Period.

This will greatly increase your ability to expand your clientele. 

If you have cheap leverage and the ability to earn a higher ROI on the money by using it to fund the next venture I would use it towards the next venture & keep the loans open.

If I can detach my partner from direct financial "proof"/liability, then that will help improve our ability for financing.

This could change your combined loan to value which may have an impact on the bank's ability to give you the loan (according to their guidelines).

Let's say the IRS audit me and present me with a bill including penalties for, I don't know, say $200,000.