Ignore what the water company is telling you.If the tenants do not like the arrangements allow them out of their leases.

MF is much more efficient and cash flows much better; it is great to have many tenants under one roof. 10% for PM is pretty normal; but watch the add-ons for getting new tenants and arranging calls, visits etc.

I am struggling with how to best structure the ownership arrangement as I am taking on the vast majority of the risk.

I was living out of the state at the time so I made a visit to the properties and arranged to have my father, a CPA, come and do an audit of their books for my account at the property management company. 

Just the one here on BP or is there a MLS/loopnet kind of arrangement for them?

Capital improvements should be an expense of the land owner as part of a lease option, otherwise you risk throwing that money away if you do not exercise the option.If the Seller's big concern is taxes go with a straight Seller Financing arrangement as it will provide the same outcome. 

He does all the work, arranges contracting, rehab, listings, renters, etc. 

The management firms will arrange for necessary repairs after purchase and then take over managing the place. 

Our informal arrangement is that when we bring him the buyer, at closing he gives us a flat fee, regardless of the purchase price. 

@Mike Jones, curious: what were your living arrangements before you started working?