However neither person is local , they both have filled out applications and seem to check out , but both have "Not for Real ID" IDs which seems like a red flag to me. 

The fact that you've "put over 5 offers on houses since February" and moved to a different strategy is a huge red flag for me.

I then look at area vacancies, economic conditions, employment opportunities, area demographics and verify that the property has not been red tagged or have any other underlying problems that might make it difficult to resell or rent.When I have my financial information then I can consider debt service and costs related to equity partners in the overall income produced.

I keep thinking about tools that can help me reduce risk by catching errors or red flags in seller disclosures and inspection docs, but that's likely because I've had a bad experiences with both.A simple and obvious example is a seller checking "No" for pests section, such as Scorpions and Snakes in Arizona when the property is in the desert, so obviously, there will be snakes and scorpions. 

Recognizing red flags early are key to staying profitable.

And if that's the situation with them...then it would be another immediate red flag for me (because I find these types of sponsors always have multiple things I can't stomach).Also there are other sponsors in their asset class that have better fees.

Or do other investors see this as a red flag and would prefer to have current leases?

And, if they had issues in the far past, it can still be a red flag too.

Big red flag.

If they won't manage a property because of the neighborhood, then I know that is a red flag for me to avoid.4.