For me liability and  potential fire issues are the main concern. 

As soon as your management company shows you they are bad -CUT...don't wait...they wont get better if you plead with them, politely discuss the issues, or angrily discuss the issues.

@Andrew Solomon  At this point they'll all go under my LLC anyway so it wouldn't be for liability issues.

Seasoning is going to be an issue as well.

I was not told of the toilet having an issue with running and of course I didn't know about a clog so there was no avenue for me to fix these issues.Has anyone had a similar situation and, if so, how have you handled it with your tenant? 

I think your problems go far beyond the mold issue.

As @Ronald Rohde and @Kyle Kadish indicated there's  some hoops you have to jump through but especially if you're avoiding ordinary income tax it would probably be worth exploring.Ownership in the LLC is not an issue. 

It is about $300 a year covering maintenance issues and a $50-$75 each call fee.

The other issue is that I need the seller to be in second position and most banks dont seem to like that if the second position is the seller.

In an ideal situation I would add an additional partner that would focus almost exclusively on locating another owned rehab opportunity and to relieve lease up or financing issues from yourselves.