And I will be lying to you if I understood most of the stuff you covered. 

@Mitch ReaumeThe policy will not cover household furnishings, the renter's own insurance will cover that.

I am also looking at duplexes and bigger in AZ, NV, and smaller communities north of Los Angeles.With just over 20k saved up and that more than likely not being enough, would you guys recommend pulling from my 401k to cover the remaining costs?

This would be your total recoverable amount should you foreclose or should the borrower refinance or pay off the loan, assuming there is enough equity in the property to cover the total amount. 

I am thinking of targeting certain neighborhoods, ones that have a low enough FMV so that rent can more than cover the existing loan payment, and placing bandit signs, as well as sending direct mail postcards, and/or placing flyers on doors.

While you are driving track your progress on the map with a highlighter, so that you will be sure to cover the entire area.If you use farming as a tool you will enjoy the benefits of working in an area where you are familiar with the neighborhood, your customers are familiar with your marketing, and your closing officer will become familiar with you.

You are 100% right Chris, but FHA has not covered the servicing aspect in their amendments.

Also, you must make sure your tenants get renters insurance to cover their possessions.

I would at least find some way to cover my closing costThat being said, the recent surprise to me is 2% rule.

A prospective Lease-to Purchase was lined up to occupy the home and cover the mortgage payments in many variations of this scheme a portion of the kick back money was supposed to "protect the Investor" some of the bolder operators actually marketed this a a second chance opportunity for the cash rich and credit poor (People with income that was "difficult" to document) The rapidly appreciating markets allowed for substantial "equity spreads" the source of the "kick back money." i.e the FMV is 100K the seller has 45K into the property and would be happy with netting 18K profit, the change goes to paying all the closing costs and a gratuity to the buyer.