His operation was eventually shut down by the county which resulted in him selling the hotel to the current owner.

The schedule E is for expenses related to the annual operation of the specific property such as repairs/maintenance, etc...I am a licensed real estate agent and I file a Schedule C for that "business" with my associated 1099 from my broker.

You will be responsible for complying with an alphabet soup of federal and state statutes.

I know in the states i operated yes, if you use a realtor you have to pay the fee not the tenants.

That'd make it easier as far as deciding which state to open the LLC in.If you open the LLC for say Nevada, but do business (own properties) in California, you'll have to pay foreign entity fees/tax...and that's pointless.Next, you need a very good operating agreement for your LLC.

Conventional lenders want to see operating data that supports the loan. 

We are local operators and we've gone through a few property management companies.  

The Agent said he was getting ~20-30 homes under contract a month, and would either wholesale or fix/flip.My question is, how would you get set up with such an operation?

That's what I mean by "jumping the education curve" - if buying and operating a small multi family gets you a profit of X, but rehabbing and zoning a mixed use gets you a profit of 2x, I don't think it's likely people will reach the 2x if they start by "passively" investing remotely.  

If you got less money, then you are giving it to a turn-key operator some place in the mid-west to buy you some pigs.