What other considerations should I be making/being aware of when it comes to Lease Options?

if you do and go to change the Deed to the property to say the LLC now owns it AS @Deren Huang suggested, that could trigger a due on sales clause in your loan agreement. some banks may look the other way and not worry about it, but there may be a chance that if you do that the bank can call the loan note, claiming the property was sold and want the loan paid. but with out changing the deed forming an LLC would be useless for it's protection because the house would still be in your name. then you might as well leave it under your name and get an umbrella policy to protect you as Account Closed suggested.

With any entity consideration, it's always good to consider things from 1) Insurance, 2) Taxation, 3) Legal, 4) Financing perspectives - would be fun to get your attorney, insurance agent, banker/mortgage broker and accountant together in a room and get the lowdown on S-corps, LLC's, trusts etc, to see how they consider each of these from their viewpoints!

There is considerable crime and the houses are usually in reasonable states of disrepair.

By no means am I saying not to do it - just make sure that you take everything into consideration.

Being that this is more of a study than an actual purchase, I'm really glad to get feedback from experienced members of BP so that I can learn what to look for when I'm ready to pull the trigger on my first investment property.

Back then Philadelphia suffered from the lack of major employers, but has improved considerably since.

.* Tenants pay a NON-Refundable Option Consideration Fee in order to receive that option.

As George mentioned, there may be other ways to structure this or similar investments that will not trigger UBIT.

Also, how much consideration is there for the improvements that were made?