The advantage is you get greater returns in terms of cash flow. 

First get all the utilities into you tenants names if at all possible.I'd put in low flow shower heads first.They make a restrictor that goes inline with any shower head and is pretty difficult to tell its there.Put a brick in the water tank.

If you are interested in how to decrease your Federal Taxes and increase your cash-flow, I can help with no-cost consulting or studies specific to your property(ies) whether they are small or large and anywhere in the US or US Territories. 

Usually, the markets with the best cash flow have a smaller potential equity gain

This will give you such an edge on getting deals flowing to you and people working FOR you!

If the lenders are ok with it it could be a great cash flow strategy.One more thing to consider is what a future potential buyer might think of the strategy.

The first option gets me experience right out of the gate but I fear that with not much cash flow, it could hinder bank loans but I shouldn’t be showing any negative cash flow.

And if you really cared about increasing the cash flow, you could furnish it and rent as a medium-term rental.

The asset protection benefit is that I can utilize Special Allocation strategies whereby, I, as a natural personal individual, would own less than 10% of this new Partnership/LLC and my SMLLC would own the remainder 90% thus the majority tax responsibility would flow through to the SMLLC.Any thoughts from the professionals of BP is greatly appreciated!

Pricing will be a big consideration.