Other than asset protection.Is the income taxed differently?  

If you're putting 20% or 25% down, you can waive the impound account entirely and pay your property taxes on your own when the bill comes, but this is just kicking the can down the road... your CoC ROI and Cap rate and all the other measures didn't actually change, you'd be "tricking" yourself if you calculated it such that they did.The same logic behind lenders using gross income for our math instead of net, for W2 people.

Low income tenants will find a couch for free on the curb and bring it into a property or get second hand clothes that has not been cleaned.

Here is the info, Price = $840k (6 units)**Gross Cap = 9%** *$75600 gross income* potential Brand NEW apartments!!

Brought true rental income = $2,100/month.

Yes - it's similar to looking at a tenants' income and credit information. 

Assumptions: Lowest Appraisal Loan INCOME AND RATE OF RETURN Purchase Price 154,900.00 Loan Amount 123,920.00 Down Payment 30,980.00 Estimated Annnual Gross Rents 15,540.00 Estimated Annual Equity Paydown 1,700.18 Estimated Annual Principal & Interest ($8,350.19) Estimated Annual Property Taxes ($3,000.00) Estimated Annual Homeowners Insurance ($746.78) Estimated Annual HOA Dues $0.00 Estimated Annual Management Fees ($1,877.75) Utility costs to be paid by landlord (if any) Annual $0.00 Lawn mainteannce costs to be paid by landlord (if any) Annual $0.00 Indirect Vacancy Allowance Annual ($) ($155.40) Repair Allowance Annual ($) ($621.60) Misc. bucket for costs per month Annual ($60.00) Estimated Annual Net Expenses ($14,811.72) SUMMARY OF RETURNS Estimated Annual Gross Income $2,428.46 Estimated Monthly Gross Income $202.37 Estimated Annual Gross ROI 7.84% ESTIMATE OF CASH FLOW Loan Amount 123,920.00 Interest Rate 5.40% Loan Term in Months 360 Estimated Principal & Interest ($695.85) Estimated Monthly Taxes ($250.00) Estimated Monthly Homeowners Insurance ($62.23) Estimated Monthly HOA Dues $0.00 Estimated Monthly - MISC ($69.75) Estimated Monthly Management Fees ($156.48) SUMMARY OF CASH FLOW Estimated Monthly Gross Cash Flow $60.69

In a perfect world, my investment strategies are as follows:1) Using FHA 3.5% or conventional 5%, house-hack MFHs in Los Angeles and get as close to breakeven as possible from rental income with a maximum monthly "loss" of $500.

Do I just make the distributions to each of us and then each of us reports it on our own returns as other income without an official form?

Is it enough to just get a signed lease for that rental income?