Would it be possible to create a separate LLC for a "Gym franchise", and include every future home gym under it, given that each are located distinct from the house (i.e. a single car garage)?

FAST4. in the above scenario, operators are often trying to offset/overcome the above variables with risky rent growth assumptions in the 6=% rate annually, and this is a dangerous assumption.There is only so many levers to pull and push.  

@Ersi Bice  you need to make the distinction between and investment and a business.if your going into the  ghetto and or hood you need to be in the business of running rentals. if you think your going to make an investment in these properties and sit back and collect rent well then you probably not going to have happy day and chances are you will lose most if not all of your investment..If you choose to go into the business of running low end rentals then put a business plan together the team together and go big.. you need to have 100's of doors to so you can spread your loss's over the entire portfolio.. because you will take loss's.. the Ghetto and hood populations are extremely transient by nature.. ( you can get the long term tenant) but that's not the norm... so your dealing with a lot of turn over.The other issue is security of your properties.. if you don't have near police state type security your properties will get stripped of anything of value within a very short time.Look up DAWGS systems in Chicago you will see how the rehabbers there need to secure the properties. if you not prepared for this you will get wiped out end of story.

I have personally been present when police and code enforcement removed occupants from a property the same day that a dangerous/unsafe condition was discovered. 

Generally 1-2 bedroom homes/apartments do best in this niche...though, I have a friend nearby making $5500/mo gross on a 4bd/2ba with a small pool that comps say is worth $220K on the MLS right now...you don't even need a calculator to know how good that math is.My only caution is the danger of municipal regulation. 

It was a dangerous game to play but it worked out. 

I’ve 1.5x rent, that way they if/when you go to court, there is a clear distinction between the rent and the security deposit.

It's too dangerous to the whole system.

Is the seepage under a door dangerous to other tenants?

Not necessarily a dumb idea; but fraught with danger and risk.