We are not sure if continue the deal: could ask the sellers fix one of them.

As this market continues, the more those properties outside the city are going to cash-flow and appreciate due to more and more people looking outside the city for property. 

No it doesn't sound fair and no I wouldn't continue that working relationship under those terms.

I've not, but folks around here do it all the time, especially in older neighborhood that tend to have small bungalow style houses. 

As long as your relationship holds up your best option is probably continue to live together in the place for a couple of years and then hope to sell without a loss. 

@Ryan Huddleston Fannie Mae requires that title be held to the property in the name of the LLC for a continuous timeline of a minimum of 6 months for partial eligibility but for full eligibility it would be 24 months.

I own all three styles.  

I think KC has a lot of continuing potential for REI. 

It will depend on what shape your property is in as to what you may have to do, you can always have the tenant inspection report come back with more things than you are willing to fix and refuse a request for repair, but that could put a strain on your relationship with the tenant if they continue to live there. 

The city continues to build out while maintaining a relatively low cost of living.