That will leave you with limited funds to actually purchase the house.

If so, you may choose to simply add it to the lease as being damaged at move-in so the tenant doesn't get charged for it when they leave.

The current owner is usually not be very inclined to give the news to the tenant out of concern that the deal does not close and they have to deal with the vacancy.

My main concern is not being able to cashflow the property using the LTR route.   

@Guenevere F. you're going to need 20-25% down to get a mortgage.If you target $100k, that won't leave you any funds for closing cost, maintenance or emergency reserves.You could try targeting around $80k, but the $16k-$20k down payment would still not leave you with enough.If you buy under $80k, you're probably buying such a low-end property that it is unlikely to meet your performance expectations.

I had similar concerns as a noob 16 years ago, what if I can't find a renter.

That was our concern with including it. 

Thanks, and that is what I’m so concerned about, is issuing 1099’s (either myself or CPA) in error and really causing a mess for the person receiving them.

One of the concerns would be, how long would this last until regulations catch on?

I agreed to leave a buffer around the entire development but we needed the allowed density..