He basically said the reason is because if you flip a house it is considered ordinary income tax + self-employment tax which ends up being at least 30% tax vs. a 15% long-term capital gains tax.

Report the recapture income in Part II of Form 4797 as ordinary income in the year of sale.

Those should be noted in the ordinary course and could be an issue.  

Freddie can get by with one year of income from a tax return to include.I have found the most flexibility with local mortgage brokers when I have been trying to get conventional mortgages that are slightly "out of the ordinary".

You get taxed an ordinary tax income from the income realized when you flip the real estate property.

Yes long term capital gains is better than ordinary income or short term gains from a tax perspective. 

W2 is active/ordinary. 

Does the loss upon the sale of the house flow thru to each LLC member as an ordinary loss or capital loss ?

@Shane SmithYou are entitled to a deduction if it is ordinary and necessary to your business.Another follow-up question would be if you have to depreciate the payment or if you can write it off all in the first year.

We use the 10/10/10 method10% down, ten year loan and interest rate 9.9%**check with attorney and usury laws in state for max interest rate allowedNote: make sure to review with your cpa on how to handle the interest payments, depending on how they determine it may be taxed as ordinary income.Feel free touch base offline if more questions