Clearly there are companies who are thriving with in-house management.

I plan to manage the bookings and do cleaning in between clients, so I will meet the "substantially all" materially participation requirement.

You didn't mention property management; are you going to manage it yourself? 

I manage 325 units currently, and there are quite a few scammers out there that use this even to secure an apartment and then never pay.

Our property management company did not accept TurboTenant applications because their screening process is not as thorough as we prefer.

We've had great tenants, a good property management company, and few expenses over the past few years.

By House #4 I figured out I should do fourplexes/duplexes, and managed to get a fourplex with owner-occupant financing.

I found someone a condo in Mount Crested Butte about 6 months ago where the numbers would work to cash flow a little/break even including pricing management into our numbers. - As with most forms of real estate.

I believe, you will also need to live in Philly or be forced to hire a licensed property manager in Philly.Lastly, you cannot deny on credit alone; so it can be a very sticky situation.

I personally prefer year lease, for me it makes it easier to manage, Less to deal with.