So here's where I come in, we sign under contract and 3 weeks later ( a few days before closing) my attorney gives me a call and let's me know there's a large encumbrance on the property.

So at what point is the cost of a tenant turn < occasional late rent?

Now almost 2 months later the buyer is threatening legal action if I do not put 4K in escrow, do I need to even consider this?

I think your idea of buying two now and then later 1031ing them into the 3rd one is good. 

Go back later and listen to the skipped episodes if you want.

It's not just about getting a tenant in today and what cash flow but the longevity of the tenant and resale cap value with equity later on.Hard to comment further without knowing exactly what you are trying to do.

Would there be a difference between selling in 1st year or 5 years later, does the step up or  step down still apply the same?

We all see a ton of out of state investors that want to retire or move down here later in life. 

If you're fixing this to keep as a rental, I would only care about the things that were stopping me from making it a rental now, or could be so tremendously expensive or dangerous later that I would want to take steps to mitigate it now.

Or, I’d look at properties (yes, multiple in the right market) to buy with cash but knowing I can pull that cash out later if I wanted to and begin recycling the capital over and over, while still having the safety of acclamation to the initial investment.