Dean - I did a lot of the rehabbing myself, but one of the things I learned is that I probably shouldn't have. Yes I saved some money, but I also tripled the time it took to completion. On the other hand finding and managing good contractors is a challenge in itself.
I think the flip vs rent question is dependant on the property. In my case this was a complete gut with a large upside so the profit outweighed the income. It comes down to a pretty simple TVM equation, which is more valuable the one time profit or the present value of the income stream?
Bad HTM - Do you buy foreclosures on the court house steps, or do you try and negotiate with banks before they get that far? I think you've hit on the key, you absolutely must build a relationship with a good aggressive bank for this to work.