Based in Charlotte.

@Nicholas MischThe ARM product was developed by bankers to induce folks to get a low introductory rate that they could get approved for based on their income and debt levels because of the lower payment terms.  

Later, it's sold and I receive 20% of the net profit.This is purely a money deal on my end (no involvement in rehab or rental).Question - If the property sells quickly (say, within 3 months), and since my profit is paid through a security agreement (I never have title to the property), how would this be treated for tax purposes?

A seller financed (SF) note is not the same as a purchase money mortgage, it is funded by equity based on an agreed sale price, this makes it an installment loan and a different animal than a cash funded note.Institutional notes have a due on sale clause, an SF note should have if it is common for your jurisdiction but it may not have.

Am I on base with my recommendation?

I realize that everyone is going to have different input and advice based off of their experiences, but I'm looking for assistance as to whether something I'm including is a definite NO NO, or if something should be added in for increased impact. 

You will only get so many based on current rules and your debt to income ratio.

@Harry Gamble The cost of insurance will vary greatly based on the individual property types, specifics, and locations.

Run the numbers and buy based on what is and not on a story of what will be or could be.Was it a project that got stalled?  

Any tax advantages are merely a BONUS side product.The way I figure it, the OP should still be up for more tax each year than if he fell for the trap of investing into negatively cash flowing properties PURELY for the tax deductions and hope of future appreciation - but, not NEARLY as much extra tax than if he hardly leveraged his investments at all.