I emailed and received a response a day later stating that the "algorithm flagged the account".

Financing either is a bad idea and will raise a red flag with a lender who will look at sources and uses of the loan request.

What are some red flags to avoid? 

Ask about any unforeseen challenges that have come up (there always are, so not all challenges are a red flag), and overall let them know you're an involved LP who likes to be kept up to date on things

Can I put a flag on his credit report?

They admitted it was after a drunk driving incident, which at the time was a major red flag but I let it slide. 

Illinois finally took the step to make it very clear you need a license to sell or market real estate you do not have title ownership to. those hiding behind  ( hey i am just selling a contract) that does not fly when run up the regulator flag pole. 

His estimate is 2-4 Months.The red flags from me are:1.

-If I move money from my homes equity into the business account, will that red flag? 

You'll probably want to do some more digging on these tenants before accepting them.6 adults and 4 kids in a 4/2 home is a red flag itself.