One thing to be careful of when buying a store is that you may be buying the business but if the equipment is too old you won't have the cash for new machines.Successful methods I have used are to lease a closed store and renovate with new equipment.

@Duncan Taylor - Were your money partners getting an equity stake using this method?

The tenant is not.Your lease should have something in it stating that funds received are first applied to outstanding funds owed (in this case late fees).You might consider changing the method of rent collection.

My method is to use the MLS (I have my license) to look at all the properties in an area that I'm interested in (in a price range I'm interested in) and create a master spreadsheet of data that includes asking price, address, rents.

An FYI too about the Jonathan Segal method--he advocates using a 203K loan for the first project.  

The benefits of these methods of finance are always showcased, but there are a lot of cons to using them as well.  

Question: What made you go with a private lender on the second flip as opposed to using the same method as first one?

If I could find deals using my own new-found ultra-conservative business methods (this was back in 2006 / 2007), and built partnerships with good rehabber / buyers who would buy my deals, I knew I could learn a bit from them, and see where I could go next once I was comfortable and had some resources.

It may not be totally correct, the only method for success, or the best way to achieve success.

This reduces the risk.My method of considering a real estate investment and determining the value is far different.