The issue is that this individual does not maintain a copy of the lease agreements for any of their property, doesn't maintain profit/loss statements, and can't tell me what kind of maintenance might be needed.

CPA regarding annual tax filing as its normal to have annual losses from the tax deductions offsetting the distributions and they can use those to offset some gains when property is eventually sold.   

depending on who your working with or if your just solo... but LLC allows for unequal profit distributions.. so that's nice... also I think a big benefit that is nice to keep in your back pocket is with an LLC you can have loss claw back. 

The owner needs to give you two documents: P & L (profit and loss) for the past 12 months (the "trailing 12"), showing you all income coming in monthly, and all expenses per month.

I don't want to buy a flip just to break even or to experience a loss.

at that point they can sell the house at a loss or they take possession of the house and it becomes an REO right?

I own 3 houses in Los Angeles as an equity investor.Good luck & sorry about the 3k loss. 

Can you sustain the losses?

@Tanya Rhodes I am so sorry for his loss.  

This is why those good CPAs are worth their weight in gold!