I don't like the idea of taking advantage of anyone, but personally if I found an opportunity like this I would understand the reality of the situation is that if you are able to make a favorable deal, so can anyone else in the market, so might as well strike first and be more reasonable during the turnover process so you can sleep well at night. 

Maybe, this would be considered a distribution of property from the LLC which would cause a taxable gain should the llc not have sufficient basis to take from.For #3 and for all of your questions really, there can be a lot of hidden complexities depending on your exact situation.

People are nowhere near as respectable as you'd hope they would be, and would allow pets to lounge on couches, sleep in beds, claw at table legs, etc;4.

The loan amount is sufficient for me, as I am not looking to borrow more than necessary anyway at current rates (7.35% seems to be cutting edge right now). 

Just imagine the positive impact those women and children can have now that they aren't worried about where they will sleep at night and if they will be safe.

So we look for sufficient capital reserves to be sure people stay out of lawsuits. 

I'd have multiple concerns :* Liability - you knowingly doing unpermitted work creating a sleeping space in the house.

You mentioned using an FHA loan, but that poses some real challenges in the city for a three-unit building because it's very difficult to find properties that can pass the FHA self-sufficiency test.

He told the inspector that his wife was a sleep in the bedroom.

In your example if value is not sufficient, they will hold you each accountable and if your four partners disappear, the bank can still hold you personally responsible for the entire deficit.