Currently my biggest fear is losing capital due to dishonest seller, issues with collateral file causing inability to collect on loan,..etc.   

It's pretty much completely hands off where they do all the renting, calls, money collection, maintenance, lawn/snow care, etc... 

An appraiser will view the property and if the repairs are extensive they can be called out and create challenges.

Get the party that wants to sell to assign to you his/her right to collect all expenses that the deadbeat co-owner has not paid (an Assignment is a simple one page document) and have the seller sign a Quit Claim Deed granting his/her interest to yourself or to another investor. 

I have a one-page extension that says the lease is extended for XX months with a new termination date of (enter date).

Sounds like a good deal and that's a great MSA to be invested in.Glad to see you're taking the time to vet the lender - there are a good deal of sham lenders out and about looking to collect your upfront fee and run.

Look I would only use the 1% rule as a minimum gage in general and I would want more for me personally . no ,I don’t need a bullet proof vest or ak47  to collect rent lol and yes You are certainly going to have more challenges and yes it’s going to be hands on management  to operate in these areas .

The group of townhouses is part of a larger collection of 5 in a row.

This is an extensive question and a lot of variables can come into play.

I was more questioning how I would or who I would collect it from.