-Lastly, any areas I should avoid that have had flooding issues in the past? 

I'm only working on 2 or 3 at a time these days, and I'm basically a concierge helping these people with title work that they weren't willing to face, and I'm helping them figure out issues on houses they were going to abandon practically. 

Only issue with this is that if owner needs money, you'll likely have to come up with the difference between the loan balance and the value of the home as a down payment. 

They will place them with minimal screening and they cause lots of maintenance issues and do not pay rent in time.

I think this inability for buyers to come up with liquidity for down payment plus agent commission will be a near-term issue, not a long-term one.

I think you need at least $10,000 in reserves, or bare minimum at least enough to cover a month and a half of rent, utilities, and any unforeseen maintenance issues per property.

Have they missed a distribution?

An if they don't meet that or whatever other guidelines you put in place up front, then there should not be any issue denying applications, and maybe they don't even apply.Personally I would not make up conditions as you go.....have to treat everyone fairly.

One major caveat is the real possibility of being put out of your own home if you ever get into a domestic issue with a tenant - I know people who have ended up having to rent a hotel room while they got something worked through the court and their tenant lived in their home, because once you rent to them it becomes "their home". 

The majority of investors face these issues when hiring contractors.