So a loss of about 55k We did a lease to own option so I could immediately take over expenses but keep their primary resident loan and interest rate.We agreed to a deal which would cover all their expenses at closing, their remaining loan balance, and $45,000.

But they were selling an expensive house in California and had horrible credit.

To make taxes easier we set up a business checking account and had all the rent paid into that account and all the expenses paid out of that account.

Looking for something with low acquisition cost, and meets or exceeds the 1% rule.  

Rates were still extremely low, which made both properties extremely lucrative with cash flow.

There isn't enough cash flow in these deals to pay the mortgage, monthly expenses and the HELOC that I'm trying to leverage against.

Outside of that, do normal due diligence like appraisal and inspection and you're risk exposure is fairly low.

@Eric Coats, to answer your specific questions, estimating expenses are pretty simple. 

My CPA was unsure... do you issue 1090-NEC for the difference between 1099-K and 1099-MISC or do you double up the income (i.e. 1099-NEC for gross rents from PM, 1099-K of the net owner distribution on 1099-K, then owner reports double income and puts a line item expense for the 1099-K since 1099-MISC covers gross rents).You need a new accountant lolPM issues 1099-MISC, not NEC for rental income paid to property owners.You would still issue the rental income paid to the owners regardless of the payment method.The Property Owners should add an expense line item on Schedule C stating that income reported twice on Form 1099 to offset any duplicated amount.

You see all the expenses you had in just that.