Don't avoid Clayton Morris.

They were inherited tenants soon to be gone & we avoid smokers NOW!!!

Lease options are only good for 180 days. 95% never close- avoid unless they put up a large down payment, qualify via RMLO - do not exceed 180 no matter what on lease option2.

Local networking with experienced investors will also accelerate your progress as you can learn by avoiding their mistakes.

My question is: is there a way to avoid this from happening in a future transaction? 

My personal opinion is unless you can afford to lose your money, you're better off investing where you KNOW the local markets, neighborhood, where schools are, what areas to avoid, etc. 

Many areas of the city vary block to block and you may end up missing out on great investment opportunities if you avoid areas solely based on the heat map data.

But - I do hear that we get to avoid 500K of Capital Gains taxes since it's been our primary residence for 4 years.

but it does kick the can down the road.Best solution:  REFI cash outof your other cash houses and fix this one correctly and get top rent.You are looking too closely at cost avoidance and not at what you'd get if you found the cash and properly fixed:  better tenant, top rent. 

This helps you avoid having to put gutters on all sides of the house which is cost prohibitive.