For instance, if you have hard money to back you up in the event that your conventional mortgage isn't ready on time, you could potentially waive the mortgage contingency.If you were confident enough in the home's condition, you could waive the home inspection.Both of these carry very real risks, but if you think you can handle them, you can submit a very strong offer - much stronger than an offer at a higher price that has those contingencies in it.

Being new to the REI world, everything I'v read in my research on investment shows instances of people buying 9% cap rates or higher.

Mortgages at 70% LTV are incredibly safe in most instances. 

For instance, if you're doing a replumb of a bathroom, you'll need to get a licensed plumber to pull the permit from the city.

Yes - there may be an instance if the distribution is above the partner's basis - that he may need to report additional income.

In your example for instance it doesn't work because you need both purchases (and probably one more) in the 1031so you can meet the reinvestment requirements. 

For instance, do a 15 year projection of rents (say increasing 3% per year) and Expense Increases (say 5% per year) and you will also understand your Cash Flow Growth.Let's say you are collecting $2k per month in Rent or $24,000 per year.Let's say you are paying $500 per month in expenses or $6k per year.Year 1)New Rent = $24k x 1.03 = $24,720New Expenses = $6k x 1.05 = $6,300NET is an INCREASE in Cash Flow by $720 minus $300 = $420 per year.Funny how if your expenses are increasing more than your rents you actually still increase your cash flow.Simple calculations but it tells a lot.There are more to RE than just Cash Flow......

In that instance 80% is allocated to investment and 20% to primary. 

What sort of arrangement would you work out in this instance?

I have had two instances recently that after a non-response from the listing agent they come back 3 weeks later after their other offer falls through and determine if you are still interested.