It will have to be a pass through/disregarded LLC to keep the tax payer the same and the 1031 valid.

$500 per day penalty up to $10,000 and up to 2 years in prison for willful evasion per entityNo cap on the amount of entity penaltiesCheck with your CPA, Tax Advisor or attorney on this as it is a freight train of compliance coming!

Affordability is no more that $4500 per month  morthage/taxes insurance. 

Plus it makes bookkeeping and doing taxes etc. more complicated and annoying/ expensive.

What if they build just outside the city limits, so they are not paying city taxes?     

I prioritize appreciation, tax benefits (rental property expenses, depreciation), ability to use leverage, and passing on generational wealth with real estate. 

@John BowensAre you loaning from a pre-tax 401K or did you convert to Roth and then loaning from there?

Since tax bills are for entire parcels (typically, though not always) then it is highly unlikely that they somehow segregated the taxes for that small portion and paid it.

If your goal is cash flow, then your best bet may be to live in it for 2 years, and then take that tax free gain (250k single person, 500k married) and buy elsewhere. 

Insurance is just an expense to factor into your underwriting just like property taxes.