I was hoping to avoid taxes or fees for both states.

As Nathan said the previous owner has "trained" them poorly and that will be evident at some point in the future which would be best avoided.

Having an ARM on a 2-4 unit seems like an unnecessary risk with interests rates as low as they are. 

To any/many of you who own property at least fill out a transfer on death deed if you live in a state that allows the process to avoid probate. 100% revokable at any time.

Looking to avoid any delays by hiring someone that can get us through the permitting process with as few corrections as possible.

To avoid having a foreclosure on their credit report.

They were told that they have about six months to do a 1031 exchange to avoid capital gains tax. 

Any other red flags to avoid with purchasing rehabbed properties? 

From our experience if it was not a property deficiency or operational failure caused by the property or outside source (neighbor or rando)- the tenant is liable for the charges- property management or vendors sent to resolve the issue may troubleshoot the issue to help the tenant avoid these no work done maintenance charges.

It's definitely important to get as much information out of the listing agent as possible that way you avoid showing places that won't even work.