The 50% rule says you have to put 50% of the gross rents to expenses, capital and vacancy.

General financial info that has to be verified: Year 2013Scheduled Gross Income $66,840Operating Expenses $26,706Net Operating Income $40,764Pre-Tax Cash Flow $40,764

If you plan to be an employee til retirement, then you will need to find out what you are lacking.

And then do I become a w-2 earner or set myself up as self-employee?

They had good credit (both 760+) and gross over $2,600/mo.

Now from what I can tell from this forum, Nolo's book for landlord taxes and the IRS instructions for 1099-misc (which is actually not very helpful), the 1099 my PM sends me should show "gross" rents in Box 1 - not 'net' rent.

It is true that if you do experience 50% of your gross scheduled rents going to expenses, capital and vacancy, and then you have to pay your debt service payment that you will be cash flow negative on many properties.

Again, not a legal opinion, as I have no legal training...Btw, the question of whether the relationship constituted an employee/employer one is going to have very little to do with whether they called themselves an employee and an employer (like many people think). 

Eight of the 28 total units are 2 BR/1 1/2 BA and the remainder are 3 BR/1 1/2 BA, with rents ranging from $650 - $800 per month (gross rental income at 100% occupancy is $19k per month).

The owners are "motivated" and asking $59k for one/gross rents $900. 2nd double asking $79k gross rents $1100.