I called Quicken Loans and got through about 90% of the process and then they told me I wouldnt qualify because they needed to use my tax returns. 

There are a couple folks buying them up in Albuquerque that are making incredible returns. 

Financing requires a job, paying cash is a waste of your money, the returns will be so low it is not worth the effort and you would be farther ahead putting your money into a income fund rather than real estate.

If I'm putting in extra work to evict people, you would think there would be some sort of large difference in returns.

It isn't just CoC Return. 

Should you consider the money that you are no longer paying in rent when doing your first deal figure into your cash on cash return?   

And second I think you need to really characterize your risk/return for both approaches you've outlined and see how that fits your personal appetite for risk.

Here are some preliminary numbers I ran: 260K FHA no repairs and current rents on left, 300K 203K, reno and higher rents on right: % Down Payment 5.00% 5.00% Down Payment $13,000 $15,000 Remainder of closing costs $3,000.00 $3,000.00 Total Due at Signing $16,000 $18,000            Mortgage Rate 4.60% 4.60% Length of Mortgage in years 30 30 Monthly Mortgage payment $1,266.00 $1,461.00 Taxes $386.00 $445.00 Sewer and Water $50.00 $50.00 Trash $50.00 $50.00 Heat/Utilities $ - $ - PMI $ 180.00 $ 208.00 Cap Ex and Ops $200.00 $200.00 Insurance $65.00 $75.00 Mgmt Fee $165.00 $165.00 Vacancy $132.00 $132.00 Total Expenses $2,494.00 $2,786.00     Unit 1 $500.00 $700.00 Unit 2 $900.00 $1,100.00     Total Revenue $1,400.00 $1,800.00     Cashflow/month ($1,094.00) ($986.00) Cashflow/year ($13,128.00) ($11,832.00) Cash on Cash Return -8.42% -6.57% I have not talked with the seller in detail yet, as I want to see if this is worth a deeper dive first. 

I also like using the cap rate in apartment complexes versus the comps used in house value and adding value with a greater return on apartments. 

Will Glaeser Lenders want to have your income (tax return, pay stubs, w2), credit, experience, bank account, LLC operating agreement, purchase agreement, scope of work, market comps, property evaluation, exit strategy.