I am told that they did not have closets as they used to be taxed on rooms that had closets.  

Who covers the tax bill when they don't pay the tax bill or the insurance? 

I understand that I need to account for taxes, insurance, and other costs—Should I go with a LML and then do a refi later on?  

You'll likely want to evaluate the investment with UDFI tax figured in.The Solo 401k trust would make the payments to the seller/lender and would also pay for any investment-related expenses.

People claim that 1031 investors over pay all the time just to avoid taxes.  

The property was rented and generated $160 cash flow after mortgage, taxes, insurance and property management fees were paid.

a lot of people will poo poo this, but I also live in a market where cash flow is low, property taxes are high and properties are expensive (which is a relative term).

Deduct NEW property taxes after you buyDeduct home insurance costsDeduct maintenance percentage, typically 10%Deduct vacancy+tenant nonperformance percentage(we recommend 5% for Class A, 10% Class B, 20% Class C, good luck with Class D)Deduct whatever dollar/percentage of cashflow you wantNow, what you have left over is the amount for debt service.Enter it into a mortgage calculator, with current interest rate for an investment property, to determine your maximum mortgage amount.Divide the mortgage amount by either 75% or 80%, depending on the required down payment percentage - this is your tentative price to offer.If the property needs repairs, you'll want to deduct 110%-120% of the estimated repairs from this amount.Be sure to also research the ARV and make sure it's 10-20% higher than your tentative purchase price.As long as the ARV checks out, this is the purchase price to offer.It is probably significantly below the asking price.

I've been knocking on doors, there is one that seems like it's abandoned, however despite finding the owners name from tax records I cannot seem to get in contract with them to make an offer (despite trying x, y and z). 

Not that I'm a proponent of borrowing just for a tax break, but the interest is a deductible expense.