Her brokerage listed the property, and she is taking me out there to do a walk through to determine if I want to take the next step. 

But I can't if closing costs are 3-5% for purchase price of each home. 4) How do I protect myself and give the seller assurance from renters with the structuring of the home insurance?

Do I have to complete the separation of units by January 1st to write off half of my closing costs/other expenses?  

It is amazing to hear that you are breaking the chains and doing something totally different than anyone around you - THAT IS NOT EASY - Kudos to you sir!

For the pre-foreclosure properties, the realtor said it took a lot of time to deal with the owner with a big uncertainties so they can't help with those properties either.Please give me some advise on how to use foreclosure.com to find deals correctly.

I do not but things are moving that way. 

Not saying I would abandon this if I can't qualify for the material participation, but it is a factor.Any input is much appreciated!

Often it's " I haven't had any issues with my initial properties, but thanks anyway"  or "my mentor showed me how to do it successfully".  

Does this seem reasonable ideally I could insure it for value vs rebuild cost?

happens all the time with us, not a big deal if its a day or two.