This is one of my favorite features of Bigger Pockets especially for asking specific questions.

The K1 has all of the profit listed on line 1 as ordinary business income and does not seem to reflect long term cap gain tax benefits. 

What is the CAP in the area?

Lastly, 1. depending on where the property is located, you might be able to raise rents and still be inside the rent cap. 2. if the property currently has debt, most Agency debt have restrictions that survive the LURA and may further impact you ability to take the property out of the affordable housing stock. 3.Are you under and HAP agreement?

Management: $240 (10%)Cap Ex: $240 (10%) (roof,water heaters, electric heater, hvacs are pretty new)Vacancy: $120 (5%)Lawn Upkeep: $120 (5%)Repairs: $120 (5%)Approx Total: $840_________________________________________________________________________________-Total Expenses/Profit Margin-Income     $2,400Mortgage: $1,350Operation: $840Profit:        $210Deal or No deal? 

This calculation above is also using 10% for cap ex and 10% for maintenance.

There is no time limit for sending the  notice, but whenever it is sent, the bank has one year from that date to redeem, or the original 3-years set by statute for everybody, whichever is longer.If the tax sale was after the foreclosure, then the bank is treated like any other owner who didn't pay their taxes.Example of overbid and interest cap:  Taxes due are $750. 

Maybe I am missing something but even though the mortgage may be getting paid off and your making a 10 percent cap rate I don't see how you would survive say a roof repair or even afford property management. 

I would highly recommend using the map feature on craigslist to comp rentals.

That may be how your lease is written but it sounds excessive, as most states that have weighed in by law on late fees cap it at 5%.