You may want to find out how old the equipment is in the place ( hot water heaters, furnaces) and even the age of the roof

Its just the ramblings of a middle aged old guy with a W2 and a half baked plan!

I'd like to pick up either one of these lots to be able to expand what we want to do with the house.Both owners live in other states, and through many online searching found they're age 63 & older, with kids that now have families of their own too. 

Can I set up a self directed IRA, invest in rental properties and pull out the cashflow every month and pay the 10% penalty until I'm retirement age?   

Age is only a number.

They think im like the anti christ.

Plus i don't want to just work most of my life and retire, id rather enjoy life to the fullest, especially at my age of 22.

That often causes their charges to be enhanced to felonies.You might also find that cultural norms are changing.While I am extremely anti-drug use, you might be surprised that the majority of people in many states thinks it is insane that someone would hold marijuana use against someone. 

How much reserve ($ or %age) normally do you keep per property for Capex/maintenance?

I too am fond of the buy and hold and as the properties age I would liquidate and maintain a healthy RE portfolio.