I am currently going through an issue what poor support at YourPorter (now Guesty for Hosts) where I am dealing with something similar.  

That said I don't know what quality of rental you have here and what previous applicants have looked like.Another thought is to bring to light of day her poor standing if you are going to let applicant 1 sign because if they are going to be responsible for the unit and you have no gaurantee that the roommate has made clear what their record is

Could I be liable for any health issues (real or perceived) that may arise with future tenants?

A lot of the responses are valid--you don't NEED a college degree to succeed in REI (Look at the Poor Dad in "Rich Dad Poor Dad" for example), just need a lot of hustle and need to continue building your skills.

Generally though, I break it down into the "five pillars" of protecting your assets.The first pillar is avoiding unnecessary and risky activities (don't drink and drive, insurance generally won’t cover your poor decisions) and take good care of your investments(maintain your property, etc) - these simple steps will help you prevent lawsuits before they even occur.

All it takes is one factor out of your control (and there are dozens if not 100s) to go wrong or go too slowly and you're sunk, unless you have a small fortune and/or other investments to bail out the one that performs poorly, or to carry it until it does finally perform.Bottom line: due diligence x 10! 

Generally though, I break it down into the "five pillars" of protecting your assets.The first pillar is avoiding unnecessary and risky activities (don't drink and drive, insurance generally won’t cover your poor decisions) and take good care of your investments(maintain your property, etc) - these simple steps will help you prevent lawsuits before they even occur.

I think if there is any possibility of it create a health hazard (even a small one) I would address immediately. 

my property manager is a poor one next door is a 2 Bed 2 bath and the tenants are horrible and have 5 children in a 2 bed room but they have constantly renewed their lease.

Midway is usually neither here nor there: you invest a lot of time and money and still get poor results.And all of the above can/should be ignored if you use a tax professional like you do.