IMO a bigger red flag would be poor record keeping on expenses and other documentation that would indicate property condition.Anyway, you're ultimately purchasing the income stream that *you* can achieve, not what the seller achieved.

How are you going to deduct mortgage interest, depreciation, property taxes, insurance, etc on the cottage tied to your primary home - without getting flagged for an IRS audit?

But, the situation you spelled out raises a lot of red flags. 

That would be a red flag for me personally.

Look for the Certified Cost Segregation Professional (CCSP) designation, which means they’re certified by the American Society of Cost Segregation Professionals.

What red flags should I be aware of?

Quote from @JD Martin: I never got to see them, but I have no doubt I was flagged more than most.

A sure sign of a dead beat customer is them NOT wanting to pay the deposit , it is a big red flag that they dont have the operating capitol . 

We have opted for a hybrid approach - LPs who want to pay for access can get an exclusive network, privately discuss operators, privately review and see other LP reviews of sponsors, and discuss "red flag" sponsors. 

If you bother too many hosts, you may get flagged as spam or get reported on Airbnb.