However, if you do your diligence and take reasonable steps to mitigate the risk, real estate can be a low to moderate risk investment in relation to the yield it produces.  

Having a partner that will let you learn is a way to mitigate risks.  

I have greater control of the rehab budget and can work with my manager to produce a product that will mitigate my capex and be appealing to a tenant.

All of my suggestions are based on mitigating the risk of taking cash out of the existing properties by only taking out 50% of the value.  

There are ways to mitigate your costs without asking people to take less.  

@Brian Burke In a situation where you can have interest only payments for almost the duration of your stabilization period (say 18 months), and the cash flow is the same as in an equity relationship, would the risk be mitigated?

Flood insurance rates are based on your mitigation. 

Right now I have no tax benefits so even if my new benefit was for just only a mortgage deduction, wouldn't that almost mitigate the $10K over three years. 

You don't know what you don't know and that usually results in extra costs.Generally you should stay away from gut rehabs on your first try as they will cost way more than normal due to poor planning, risk mitigation, and extended timelines.Your selling costs are indeed low.

It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.Make sure your property manager is a licensed real estate brokerage.Understand you can not eliminate all risk, only mitigate it.