Hi @Steven Hamilton II,I have this same question (1065 vs Schedule E)  However the partnership is between Me (as a person) and my partners LLC (which consists of him and his wife).  

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Here is some key information:Property recently hit the market and has 2 cash offers alreadyThe seller provided a pre-inspection report, which I shared with 2 different lenders, both think it may fail conventional financing due to potential structural and electrical issues (realtor thinks it could pass conventional)Seller has 100% equity but is behind on other payments (not sure of the urgency money is needed)This is my first attempt at an “investment” property so I’m new to thisI see 3 optionsMove forward with an offer using conventional loan pre-qualification-Not as attractive of an offer to the seller-Possibility that appraiser calls out structural/electrical issues that need to be fixed before closing, effectively causing financing to fail- Best terms and fewest loan fees for meUse a rehab style loan such as ChoiceRenovation-Even less attractive than a conventional offer to seller, but less risk of failed financing if appraiser calls out issues-Slightly worse fees and interest rates compared to conventional-Lenders tell me possibly up to 60-90 days closing in some cases, with red-tape for contractor requirements and draw schedules (sounds like the most hoops to jump through during rehab)Use a hard money lender-Most attractive loan option I can give to seller so I can compete-Much higher fees and interest rate for me-need to refinance into a conventional at the end of rehab (not familiar with seasoning periods but I think this is a factor as well)Which option would you do?

The fees for a refinance / cashout would be ridiculous compared to the amount of money you're seeking.

The unit consists of two beds, one office and one bathroom.

If you consistently analyze properties, recognizing a good deal will be much easier when it shows up.

there you go. the problem is appraisal. comparable sales, and your approach to building an ADU against the recommendation of your market. super beginner strategy it's popular in ohio as well but just not worth the investment. 

Long and short, when I now look at my "return on Equity" numbers as opposed to my casual on cash return numbers it makes all the sense in the world for me to sell.Wholesalers contact me at least once a month the past 10 years and are always asking if I want to sell one of my properties, but I'll be hard-pressed to ever find a wholesaler that wants to pay me for what these properties are worth and is also willing to buy all the properties in one transaction which is how I'm looking to sell.Given how good our return numbers are here in northeastern Ohio compared to the parts of the country I know that out of state investors would definitely be very interested in in this portfolio.

Double-check the ARV by comparing recent comps in the area to make sure the numbers add up.Run your numbers again with all costs (purchase, rehab, holding, and resale) to confirm the margins are solid.

Commercial properties can be lucrative, but the financing/underwriting required from lenders is generally more "conservative" relative to residential and usually have higher interest rates (unless you have a "rock star", long-term commercial tenant in place) and generally require more equity from the borrower compared to residential.