We have been doing this constantly in Boise as we are such a high appreication market, but still more cost effective than CA.

Meaning, if you take the money only, you would have depreciation recapture from your cost basis up to the original purchase price of the building (not including the land cost because it wasn't depreciable), plus a capital gain up to the insurance proceeds.Hope this makes sense. 

There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.2.

Quote from @Stepan Hedz: Selling fees (estimate), $30,000, and holding costs?

Research state-specific costs and regulations to decide what’s most cost-effective.3. 

You would need an extremely high grossing property under market value on a something like a 5 year lease to profit, and you probably will not profit after startup costs until Year 2 or 3.Do not even think of trying it with 1/2 bedroom apartments or condos nor 2/3 bedroom homes. 

Again, it depends on the borrower's priorities (time / energy / fees / opportunity cost of finding new deals / etc)4.

It helps absorb the cost of your payment and gives you a better understanding of how REI actually works.

We are considering building and holding townhomes but need to determine the costs.  

Worst case, pick up the phone, if it costs you $50-100 for legal advice, wouldnt it be worth it to save potential $1000's.