Where can you create value - Increasing occupancy, reducing expenses, increasing revenue from other sources in addition to raising rent... 

Also ask your buddy if you can help him out to reduce the costs. 

To avoid anchoring on the $500 number, I want to clarify these would be leads that:Have all but agreed to sell their propertyHave given a fairly low price compared to marketIs highly motivatedIs looking to sell immediatelyRealistically, most "leads" would sell for $50-$100 - this is someone ready to pick up on the other line to hear someone make an offer on their house,  with you as the wholesaler equipped with some other basic information about them and their needs/wants.I'm not sure which sites you're referring to, but from my experience in using Listsource and Melissadata, I expect to spend at minimum ~$100-500 in mail to get a call back, not including the cost of the list itself, without any sort of information on the potential seller, which leaves me at a disadvantage from a negotiations standpoint.Regarding your mentioned model - we're definitely exploring the option of:Significantly reduced cost per lead with profit sharing models for the more risk-averse individualsNo upfront cost/lead, but higher cost/lead if a bulk of sales ends up in a salePete

If you have any conditions requiring performance by a buyer/tenant in connection with an option, where performance is required in order to exercise the option, you don't have an option and you may have a financing contract taking a payment that reduced the sale price.

This immediately reduces your cashflow by $439.59/mo and makes the numbers look worse than they really are since more of that mortgage is paying down equity than it initially appears.I wonder if the below-market rent assumption is too conservative?

That way you manage expectations and reduce your costs.I recently had a unit turn over and removed the window air conditioner.

It actually reduces cash flow because the equity in the property is of greater value than the mortgage rate (say 10%) and comes directly off the rental income as a expense.

These deductions are what we want to focus on.Deductions help REDUCE your taxable income.

Then look at your overall Schedule E (or C, 1065. 1120, etc... depending on how you report) to reduce your expenses. 

Banks are under pressure now and with laws like the Corporate Transparency Act they have the government's tools behind them to reduced their riska and start calling notes due so they can sell them or move them off the books.