Of course, with all things, the answers to all these matters will depend on the circumstances.California tends to have more laws on the books and requirements and restrictions that it can be a good idea to form a CA LLC for out of state property so that you as a CA resident are covered, and to try to have your contracts fall under the purview of CA courts.

Or are there related party restrictions on the exclusion tax benefit? 

I can't find a bank that wants to build a relationship with me even though I have been successful in every project I have done with private money.Its sad banks are so restricted.

Most banks have restrictions and a Clause where the mortgage/loan becomes "Due on Sale".The biggest benefit of going from personal to LLC is to protect your assets against a law suit due to an injury or death by someone renting or using the property.

Personally, I think it’s important to continue to stay creative and generate new ideas on all facets of the business as legal restrictions continue to present themselves.Have a good one!

If you want to invest a privately owned firm may be the way to go as they have less of a corporate structure setting restrictions on you.

There have been a lot of restrictive laws passed in the past few years in Colorado.

@Jacqui CaseyAs others have said be aware of HOA rules that might restrict STRs. 

I was thinking about selling blocks of investments into the project of 50k increments and it being set up like a real estate trust/ private reit without the restrictions. any advice on something of that magnitude with multiple investors since it couldn't go forward until all blocks were filled. 

FHA can have other restrictions on condition as well.