None of the three met my criteria (one failing on credit, income AND background), one lied about income, and one couldn't prove income.  

So to recap, in my pretty house model, doing a wall to wall rehab, all floors, kitchen baths, walls will allow me to set a record on the rents, and when it comes time to advertise I attract the tenant with the higher credit/income and  I would like to add that in March I closed on a SFR in Embassy Hills Port Richey for $51,000 A 2/1/1, 1100 SF.   

My primary goal from real estate is to generate passive income and amass a large enough portfolio to quit the 9 to 5 grind and earn my financial freedom.

Another way I've looked at it is we split the net income after expenses before loan repayment 80/20 and they get 80% and pay the full mortgage out of it.  

My experience is that I can rent a two bed/one bath upstairs apt for $650/month.Mortgage - $300 (assumption is conventional loan...this is variable)Maintenance - $32.5 (5%)Management - $65 (10%)Property Tax - $50Total Expenses - 447.5Net - $252.5Quite honestly, I think I could make these numbers look better (refinance my duplex and get cash out for much less for example), but I'm curious what others think.I should probably state that my goals for right now are horizontal income without too much work.

By this are you asking if the 20% interest you receive is taxable income?

I am using the following numbers:Vacancies - low in my area so I'm using 8%Repairs  - 5% of rental incomeCapital Expenditures - 5% of rental income + 1% for every decade over 20 yrs property age (i.e. 7% for a 40 year old house)Management - 12%  (expecting 10% + 1 mo per new tenant)So this adds up to at least 30% of my income.  

They 5 are: Character (reliability, integrity), Capacity (sufficient income or cash flow to service the debt), Capital (the borrower's net worth or how much of their own money they put into the deal), Collateral (the value of the assets that secure the debt), and Conditions (the borrower's situation and the state of the economy or local real estate market).

Today about two years later he could sell it for 110-120.I think this strategy is one of the least risky that can add a lot of income with minimal work, and gives you experience rehabbing. 

From most information that I have read this seem to be a smart way to start especially when you have limited income.