Using your analogy with the 2/1, you need to find it for lets say ~130k and it needs 70k worth of repairs/remodeling to give you an APR in the 250-300k range and make sure you can rent it for >2k a month. in order to make the greatest cash flow you need to find the most rundown houses to fix, or go on the less desirable areas. unfortunately that's where the majority of investors are as well. i'll give you an example of one i just completed. it is in an up and coming neighborhood. some parts are scary, while new construction of luxury townhouses are within a block. it's a duplex with a 3/1 and a 2/1 (i know i said i wouldn't usualy get these, but it was a really good deal).

Selling a property in the first 7ish years with a mortgage is not great because the strong majority of your mortgage payments are interest and the principal balance doesn't go down much. 

This isn't a complete business plan but it's a solid component of it. 

I think it would give a major jumpstart to rentals for me even though the only money made is in equity.

However, the big hurdle has been that most lenders that we have spoken with want to see the retail component of the project at least 50% leased prior to commitment.

I too pay close attention to current components and appliances condition and life expectancy.  

However, I do get calls for major plumbing repairs, air conditioners, and hurricane damage - hence the need to factor in maintenance.

It wasn't anything major, but certainly some work.

For instance, if one’s net worth is $500K, and most of its tied up in real estate, would it be a good idea to keep the next investment at $100K or less (20% of total net worth) from a diversification standpoint to prevent from devastating loss in the event something majorly goes wrong with the property?

If all major components in the property are new (or recently replaced/upgraded) and you don't have to worry about them for a few years, then not as big of a deal and you can building up the rainy day fund.