(Yes I know there are other restrictions/conditions.)In the past, I have toyed with the idea of a vacation/rental property in Ocean City, MD, Rehoboth/Bethany/Dewy, DE, and/or the Deep Creek Lake, MD area (I like the idea of being within 3 hours of the rental property in case something goes horrible wrong and I need to travel to the property). 

@Miguel Suarez We’re so committed to the Metro Detroit area, we created a "Deep Dive" series here on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider: https://www.biggerpockets.com/member-blogs/3094/99854-deep-dive-into-metro-detroit-cities-ecorse We're not aware of any other property manager, agent, turnkey provider, flipper or wholesaler that's made the commitment to do this!

We would get toll charges and red light camera charges and nobody would own up to their mistakes.

This hurricane red tagged many of the properties on the beach near our duplex. 

Usually you can get a deep discount at a foreclosure auction. 

Claiming REPS is a red flag for auditors, so be sure you log everything in detail with your CPA from day one. 

Don't be so harsh on that CPA :). 1031 is a narrow deep niche that only nerds like me delve in.   

Keep in mind, when you get ready to sell houses in low-income, el cheapo areas, your only buyer will be another investors who will want a deep discount. 

Is this a red flag?

Normally, I do not establish LLCs until I have the property under contract and I am deep into the closing process.Regarding if you need a LLC, it all depends on your risk tolerance.