But, if you only budget 5% and have a month long vacancy then your Cash Flow takes an unexpected hit.  

Many times these include underestimating Renovation Costs (Rehab Cost) especially worse if unexpected issues arise, improperly running the comps (Comparables) to determine the After Repair Value (ARV), or overlooking the (Holding Costs) that are paid monthly until the property is sold.

The Trust is the key component to AP.

Each is a vital component, and the three of you need to work through the roles first. 

In that case it would not be an appropriate replacement property for your 1031.But what I see you describing is really just a NNN lease of the new property with an added component of the rent to own deal. 

Area is important, however if your buying out of state the most important component is your team!

They are presenting an intriguing new mortgage product with an interest-only component at a Meetup I’m a regular at in case you happen to be free.

At least until you have the property inspected to determine the current condition and life expectancy of all major components and appliances.  

Unlike a FHA loan, under a conventional loan the mortgage interest component will automatically drop off once you have more than 20% equity. 

Also, it's been my experience that a tenant that pays late that much is living paycheck to paycheck and is just one unexpected bill (i.e. car repair, medical bill, etc) away from not paying rent at all.