@Robert Lei make sure you are properly (legally) noticing the tenant of your termination, every lease is different and state laws are all different, at just a cursory read, email and text is probably not sufficient *not a legal counselor, not legal advice.

You pay a token rent; just enough to validate the contract as legit.Also, he gives you a lien on the property for $5,000 to protect your interest/option fee, which would be released if you chose NOT to exercise your option.Whatever you do, don't let this go beyond 6 months. 

It will never appreciate (nobody except another investor will likely want it)  and the rent is not sufficient to cover cap ex in the long term. 

Additionally, do you think that managing my first few properties for a year or two would provide sufficient experience?

Depending on the lender they may still only finance to a maximum based upon the purchase price if you are within 45(ish) days of purchase.If you are confident the property will appraise sufficiently higher than the purchase price, you can Close with cash or with "open" financing {aka an Open Mortgage}.  

Also is it mandatory for the owner of the LLC (also owns the residence) to submit a 1099 to IRS for the rents paid or is it sufficient for the residence owner to only report the rental income in Schedule E just like any other rental income?

When the equity is sufficient you could refinance at that time & pay them off.

Based on your DB this property does not have sufficient cash flow.

Thank you for reading.It's in sufficiently horrible condition that putting $50k into it will yield >$50k at the sale, same with $75k or $100k, but it doesn't sound like anyone has the capacity to do that.Honestly, I think the solution here is just to list it.

A disregarded entity pays far less in taxes than you would in another structure that incurs double taxation.Insurance costs, special assessments, sufficient provisions for capital expenditures, property tax increases, legal bills, etc can all pop up and force you into the red.Moral of the story, do your due diligence properly.