Relative to the $200 a month extra for MTM, leasing long term means 10 months or so is the breakeven point.

This is more of a strategic play for the future and I don't have time to pick up many extra properties unless they are very close.

pumping a tank should always be on the shoulders of landlord / property management and priced in with the cost of rent also you should make a note that tenants are NOT to use bleach and or antibacterial soaps as these products will kill the bacteria in the tank and cause a lot of problems down the road also it is a good idea to add  a bacteria of some sort to keep it working properly you can buy the over the counter stuff or just add some yeast mixed with water once a year or so I use bakers yeast every three to four years  

This house has an extra two car garage, and a huge lot, so we were hoping that would be a plus.

You should have ran the numbers with the rent at 1250 and only offered based on that, any higher rents are just extra icing on the cake. 

I'd read this article before you do anything, including the comments (lots of extra info)-https://www.biggerpockets.com/renewsblog/2013/08/1...Just so you know all of the implications of going the LLC route, especially if you live in CA.Hope that helps!

I've got some extra cash but I don't want to be cash poor with a new property with possible unforeseen issues.   

I'd rather have the extra security on the property, however I don't feel the $89 at home depot are very good, so I'd recommend a stronger door as my units previous had the $89 doors and they look pretty unsafe as people can cut through them pretty easily.

Am I legally allowed to increase his rent a little to cover the extra water usage? 

Then later on refinance out to get your leverage up on it and then use the extra money to go buy something else.