A good place is to go to auctions.

Obviously I have little information to go on but my gut suspects they are game players and they think once they are in the house they will be able to leverage the problems and live there free for a long time.

Another reason is that a borrower may expect his earnings to go up substantially in the near future, but wants a lower payment right now.call optionSimilar to the acceleration clause.capAdjustable Rate Mortgages have fluctuating interest rates, but those fluctuations are usually limited to a certain amount.

Some prefer to go with the waterfall, and some do pref's.

Surrounding homes are around $200k + with similar plot size and sq. footage.I put in 40k desired profit to cover $15,000 paid to lender plus in the closing costs a point fee of 3% (Agent fees portion)These numbers look average correct?

but what creates this out of state frenzy is anyone can do it.. that has 20k in their pocket and desire and a 640 fico.. that's it.

To get desired asset protection, you need to keep separate books for LLC.

Yeah, I'll also look into moving debt -- I only have around $75k left to go on one.

If you hire them as an employee you have to pay un-employment insurance, of course you will have to pay for the company side of all the taxes, filling out schedule B, 940,941, and all the state forms, you will have to go through an audit once a year for the unemployment taxes (only taxes a few minutes but you need to know what you are doing).For one employee not usually worth all the headache. 

Refi is the way to go if you truly want to harvest the equity.