And this factors into an IRS safe harbor. 

Looking to get some clarity on this matter -- a lot of people on BP suggests a percentage method, which I think can be a miscalculation for cheaper and older SFHs because a lot of capex is fixed, but rental income, size of house, vintage of house, type of neighorhood factors into the calculation.

This may play a factor in the strategy on how to handle this situation.It doesn’t seem like there would be reasonable time for the seller to make a proper repair before closing, so best approach would be to request a seller credit.

I would have never guessed that would be a factor.

What if a tenant's child gets exposed to lead paint dust before you create the LLC?  

There are lots of other factors to consider other than the 1% rule. 

Cash flow for lower-tier props can look amazing on paper, but there are a lot of other factors that make real-world returns less impressive.

But if I were you, before I make any of those decisions (active or passive investing ) or what industry & niche, I'd expose myself to a lot of different viewpoints. 

@Christopher Smith I agree the process is fairly straightforward but the risks of doing it yourself and having the IRS throw out your conclusion and taking on penalties and interest for under reporting income is something to factor into your cost decision.

Aside from property taxes, and analyzing rents in the area what other key factors should I be looking at to establish cap rates and potential profit?