I wanted to put this out there as a contest to ramp up responses and ideas for creative financing approaches to see who can help me in figuring how best to structure the deal to minimize my risk, increase learning opportunities during the process, and maximize returns in light of minimizing risk.

I feel as though we miscalculated something.One unit yields $400 in rent (1 bedroom) and the other yields $800 (3 bedroom).Total Rent: $1,200Duplex Price: $67,000Down Payment: $3,350Repair Estimate: $2,000Closing Cost Estimate: $1,500Total Investment = $6,850We factored in:Mortgage: $340Mortgage insurance (we would have a low down payment): $40Home owners insurance: $67Property tax: $113Vacancy savings: $60CapEx: $60Repairs: $60Lawn/Snow: $120There are no HOA dues.Total costs: $860So, our monthly cash flow should be $340.Annual cash flow $4,080Total Investment $6,850ROI: 59.5%I feel like this return is far too high.Is there something obvious we're missing?

After getting out I returned to school to finish what I started. 

My understanding of the strategy is that you would find a good investment property, increase its value and stabilize it, and then refinance.Pulling out cash from your primary residence tax-free can be great, as long as you are getting a better return than the additional interest you are paying.

For rentals outside of Self Directed accounts we are able to get returns of approximately say 15-20% when figuring equity building and cash flow - this is with loans of 20% down-payment.

Show good income on your tax returns.

One of them presented a new deal to me but I see there is an "origination fee" of 1.5% that goes to the managing partners of the LLC (they also are the property managers and take a 3% of gross as fee but only after 7% pref rate is returned annually).

I looked at the place and believe that I can sublet it for $700, creating a  $40 cash flow with no money down (so technically infinite returns).

If you take a personal loan from your 401k it would be making 5.75% return, but it you turn around and lend this money to some other investor who needs the money and can make 10-12% return, tax deferred, I think the latter is clearly more beneficial to your 401k and ultimately to you. 

Minus a wholesale fee and some other holding costs and you’re down into the 10% returns.