OpEx does not include mortgage and distributions.

If I understand you correctly you wish to take a distribution from your 401k, right?

There are a few homes of nice standard being sold to the working class people and they are averaging between $65-90k, which is what I derive my ARV from.I know all you seasoned vets out there say to steer clear of these properties bc they become a huge hassle.

Distributions can also be structured in a way that allows your money person some or a majority of the first cash flows, and there are creative ways to structure his input (eg loan to company vs equity).

Given my situation, which business entity should I use, which state(s) should I register in, and how will I be able to accept funds and pay distributions out of this entity?

The Military, Automotive, Agriculture, Distribution, Food, Machinery, Plastics and Printing industries are the largest employers in Hopkinsville.

You can structure it as a payroll expense (however watch out for self employment tax), you can pay out a "management fee" to yourself, or if you are a partner you can take a distribution which will be drawn from the net income/retained earnings.

Earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not materially involved.Generally a bit of a stretch in reality to include residential rental properties but under the definition they are included.None I have ever owned were passive from my perspective. 

If my portfolio isn't 100% occupied, tell me before the owner statement and owner distribution come.

Was the property distributed.