Hey BP community.  Thank you guys so much for sharing your experiences with me.  I've learned a ton of information over the past month or two here.  I wonder if you guys can shed some light on this particular situation.  Also, if anybody has architectural questions, construction, costs, etc. questions I would be more than happy to help too.

Here is the deal I am needing advice on:
The address is 3110 E Thompson St Long Beach, CA, 90805 (shows 459k zestimate on zillow)
A friend of mine owns this property with his 4 siblings.  He is 1/5th owner.  The property is owned free and clear.  His siblings are willing to sell it to him for whatever the market value is, minus 1 brother, who will be a silent partner.  Him and I are estimating the fair value at 450 which means we would have to pay his 3 siblings $90,000.00 each and then him and his brother would keep their $180,000 worth of equity in the property ($90k x 2 siblings staying in the property).

We were thinking of taking out a mortgage to pay his 3 siblings off 180k.  We're estimating the mortgage payment at around $1,300 per month for the 180k loan.  
Now here is the fun stuff. He is going to partner with me on the property and go 50-50%. Him and his brother who stayed in on the deal will have their own family agreement. He wants me to handle all of the pre-construction and construction involved to add 3 new 2bd/2bth units on the lot. There is an existing 1 bd/1bth unit already on the lot. The zoning is R-2 which means we can add one more primary and two ADU's up to 800 SF each. There is a slight chance we can convince long beach to re-zone the lot to R-3 as they just started re-zoning areas to allow for more housing. But worse case we have two primary and two ADU's totaling 7 bedrooms/7 bathrooms and roughly 3,100 SF.
I researched the rents in the area and it looks like we will be able to gross $9,200 and if we property manage it ourselves we can cash flow $6,000.00.

So the advice I'm looking for is:
1) What is the max we can take out on a mortgage since the house is paid and we only need 180k to pay off his brothers?  We are thinking taking a fixed low interest mortgage would be our best bet to finance all of the per-construction and construction costs.  I'm estimating I will need approximately 350,000 for the construction and another 20k or so in city fees.  Is there a way to borrow up to the value or the house on a mortgage?  If we can at least get close to what we need we can finance the rest through construction loans or personal financing.
2) What is the best way to partner on a deal like this? I've heard opening up a LLC and having us both 50-50 partners on the LLC is the best way. My partner would then fill out a quick claim deed signing over the title to the LLC? Is this correct?