REP would come into play if you have losses - expensing items creates a larger net loss and REPs losses aren't capped at passive activity income.

It can be a pretty big deal and isn't anything worth playing with. 

Galvanized pipes in STL are a nightmare, and almost all of them in the city are at the end of their lifespan, good news is correcting those issues is a major bonus when buying a remodeled house.We are still seeing multiple offers on properly put together houses in nice neighborhoods, so you should have clear skies when you go to sell if nothing changes. 

I assume it's in the lender's best interest that I close after this policy comes into play, or is that not the case?

We did research on area and we knew there are bad elements but i think we underestimated the problem (You know mind plays with us when we have already decided to do something especially when you have overconfidence on yourself ).

A bonus is that even if I'm not successful on the first go-around, I'll have the addresses saved to send follow-up letters down the road.

Yes, but remember not the entire rehab will be eligible for bonus depreciation.  

Usually 2-3% is what investors anticipate, anything more is a bonus.

Bonus, since i'm an agent I earned a commission on the deal! 

So I was unsure if that would play a role and should have mentioned that.