I too am a Dave Ramsey fan he teaches some great principals but your right they don't help much in investing. 

I rather enjoy using other peoples money, while my renters pay down the principal.  

Talk is cheap - look at his credentials before investing in a mentor.The problem with Washington investors coming to Baltimore - is that they pay too much because they compare DC prices with Baltimore values.Be smart about what you do and who you work with - you can look at listed real estate but your best deal is going to come from dealing directly with sellers.Also remember creative financing techniques - nothing down deals - Control and Roll System - Delayed Settlements - Hybrid offers - and don't forget owner assisted financing and make sure you always ask for a principal mortgage.Have fun - make full disclosures and make sure you understand the laws related to mortgage foreclosures - fail to do this and you may have a paid vacation to the Gray Bar Motel (a nice little room with one small window and the food is free, but the space is restricted).Remember your goal should be CASH FLOW or EQUITY - forget the emotional appeal - it is all about numbers - understand them and you'll do well in Charm City.Charles Parrish

Also, even with no cash flow, the principal portion of the mortgage is being paid down, at a rate of ~$200-300 (increasing your equity) every month.From a purely financial standpoint, it makes sense to compare investments and go for the best returns, whether it is in Killeen or elsewhere, but I can understand the benefits of wanting to have a local rental that you strongly believe will increase in value--you can drive by it, manage it easily, etc.

The buyer usually pays for it out of the monthly payment to the seller and then the seller typically actually pays the treasurer the taxes and the insurer the insurance premium but sometimes the buyer pays the insurance premium directly to the insurer and then provides the declaration page to the seller so that he is only paying principal, interest and taxes to the seller.  

TLBs typically mature within six to seven years and have a small repayment schedule (usually about 1.0% of the principal amount of the loan per year, payable quarterly) during the term of the loan, with the remainder due on the maturity date.

Assuming I want long-term cash flow (primary goal) and to protect/grow capital in the process (secondary goal), what benefits or drawbacks do balloon payments have?

The private investor is made whole with payment of their principal returned along with their agreed upon remaining interest and if the private investor wishes to continue we put them into another property.We have a PM on all of them already.  

I could pay him a decent sized downpayment, or probably even purchase this with a conventional loan - but then I lose the principal paydown with the original mortgage, plus I want to have less cash tied up. 

However, some times smaller homes may NOT have a higher price per Sq Ft in which case make sure that you are comping similar homes.For approximate HML costs, you can multiply the principal amount you intend to borrow ("P") x interest rate ("I") x time  ("T") listed in amount of months divided by 12 [e.g. 6 months/12 months] + Points (as a percentage] x Principal borrowed.Equation: (P x I x T) + (P x points)Example: $100K loan; 12% interest & 2 points, and 6 month timeline[$100K loan x 12% interest x .5 year(s)] + [2 points x $100K loan] = $6K + $2K = $8KGood luck!