The bird dog then gets the property under contract and assigns it to me with a $1,000 assignment fee tacked on, making him a principal in the transaction.

Some commercial RE guys that are principals at mid size firms.

Thanks for the comment @Troy S. .Living in a multi for my first investment has been the plan...but I remain open minded, particularly to the idea of what I suppose is a "slow flip" where I'll live in the property as I renovate it and sell it after a few years, taking advantage of the principal residence exclusion under IRC 121...Rt. 76 is undoubtedly a disaster...when I was living in Rittenhouse and working in KOP I would regularly park my car at the Norristown TC overnight and take the train into center city just to avoid it.   

Paying down principal can be a way to force savings.

Your capital gain income tax liabilities are deferred over the term of the installment note and would be recognized and taxed as principal payments from the installment note are received by you. 

Some may well never fully recover from that hurt.You also have principal paydown.  

Not Principal.

Tired of being at the mercy of flaky buyers or sellers and ready to start investing as a principal and control my own destiny.I have partnered up with a friend Jack who has owned several hundred units a sold them a few years back, and we are looking to hit the ground running and get into this full time focusing on wholesaling, rehabbing and eventually buy and hold once we find the right deal and have sufficient capital.

I've done some analysis of the benefits of holding it despite the cash flow loss and figured that the house gives me a "net worth" gain of about $10k per year taking everything into consideration (future cash flow, the principal being paid down by renters, the increase in the value of the house where I've assumed only a 1% increase to be conservative).

So, any payments made by the renter will be revenue to your IRA, not principal pay-down.