I am told that they did not have closets as they used to be taxed on rooms that had closets.  

Your best advice would come, for a Tax Advisor NOT a Tax Preparer (CPA).

Who covers the tax bill when they don't pay the tax bill or the insurance? 

I also suspect inflation will drive continued migration to lower cost of living / lower tax states.  

On property number one, I would cash flow $750 a month after mortgage, taxes, and insurance if I also rent out the unit I live in.

This is when you hire a staging professional or staging company to come in, make recommendations, and do the work for you.

Wanted to still be close to family but maintain a cheaper lifestyle, still have strong appreciation, and much better tenant/landlord laws, taxes, etc. 

Start by talking to a cross-border CPA and attorney to handle taxes and legal structures properly.

Once you find someone willing to let you shadow them, approach it with professionalism and a willingness to learn.

The SEC claims Fossum misappropriated hundreds of thousands of dollars from the funds by living rent-free in a fund-owned home and having the funds pay for extensive international travel and his federal taxes.