Realistically if you have around $18,000-$22,000 liquid per house and its at least drawing even you eliminate the vast majority of issues people run into with over leveraging.

Whether it's buying the first property, remodeling, renting, or selling it slows you down and eliminates impulse decisions. 

This effectively eliminates all taxable income.

This approach is cost-efficient and eliminates the complexities of dual-state filings.

This eliminates half the risk!

Because now we eliminated the foot-print of autos.

Adding a lead filter may reduce/eliminate lead content, but they are still going to replace the pipe.

However, this strategy doesn’t eliminate the need to budget for repairs and capital expenditures (CapEx).You’re right that without cash flow, unexpected expenses like emergencies or major repairs can be risky.

In your second scenario you would eliminate all capital gain and depreciation recapture with the step up in basis.there is no statutory holding period that qualifies you to convert the properties. 

We used to try to offer to comp and cancel right away if they were a pain so their stay would be eliminated, but I don't know if you still can do that.