10% vacancy budget is good.  5% each for repairs and capex is low.  15-20% combined for these two items would be better. 

Also, although it is rare, once you have an established relationship with a Portfolio Lender you can *sometimes* do them for nothing down.

We are trying to decide on how to structure the operating agreement which allow for flexibility for us to use combined funds for renovations but also to be able to withdraw funds for distributions.

I read an article about this https://www.bradyware.com/combine-home-sale-gain-exclusion-with-like-kind-exchange/  but it does not answer to my specific question.Thank you

I rarely use a lawyer when I buy ,sell or rent .

I rarely see any units for rent, and if available, goes fast.

The cons are they will be significantly more effort until you get one of those rare tenants in the property. 

(Lease to purchase options are very rare in DC, particularly in Capitol Hill because the RE market is so strong!) 

Hey Jaycinta,for me as it stands unless something is missing this deal wouldn't pass my tests. a few reasons. i personally am looking for 10% cash on cash minimum. i'm also looking for some sort of value add, either the purchase price could be great, or some units would need work to increase value or rents would have to be low and you could increase them. from what you've presented it doesn't seem to have any of these abilities. a few other things to point out, very rarely would a new to you place really need zero dollars of work. think paint or carpets, or landscaping or anything like that even if a large rehab doesn't need to take place. additionally i think if you shop around you could do better than 5% for your mortgage. 

. :)If you do go over that $500K limit and if you want to also defer recapture of the depreciation you can always combine a 1031 exchange with the 121 exemption.