Identity theft and advanced fee scams are big risks.

Personal use based on a business purchase to deduct without actually having a business use is fraud.

Diversify and have little concern over fraud. 

From what I'm seeing, they're identical in that they offer the same ease of restrictions that would otherwise need to be satisfied in order to acquire regular financing (such as credit, DTI, employment history, etc).

Otherwise, you would need to find better deals.Some might consider it "tax fraud" (and I'm not trying to advocate fraud), but you would claim less deductions on your return one year.. 

When I changed insurance companies on my rental, my insurance agent told me that the fraud was so widespread that a lot of companies pulled out of the Valley entirely.

If Fannie Mae or any other regulating entity finds out that you're renting out a 2nd home, you could be charged with mortgage fraud.

For example, the major location specific costs and risks might be as follows (not ranked):Location Specific Costs:State income taxProperty taxesLandlord insuranceLocation Specific Risks:EvictionPopulationJobMaintenanceCostsTo show the impact of differing state income tax, property taxes and landlord insurance costs I will compute cash flow for an identical property in three different locations.

No - this would be mortgage fraud.  

But with this new project slated I feel like it gives the city more of an identity.