I haven't thought about doing a duplex conversion - I was always under the impression that a 2 bed rents for less per room than an equivalent 1 bed, is that assumption incorrect?

Has anything I stated above incorrect or based on speculation?

Forgive me if I use incorrect terminology; I'm still a newb and a foreigner at that! 

If used incorrectly, it could cost you a fortune.

I'm only pointing out your incorrect statements. 

@Jonathan Godes the advice you provided is incorrect, however no fault to you as the code surrounding a situation like this is extremely complex :)@Kurt Pourbaix To answer your question, if all you are doing is lending then this will be considered a passive activity for you so your profits will completely avoid the SE tax aspect.

And it turned into a huge mess because the original (incorrect) contract was already signed by both parties.

That statement is categorically incorrect......

Sorry for the late response, i had my alerts set up incorrectly..

Took a few weeks to resolve, but the buyer had to invoke contingencies and back out of that particular purchase until we could gather documentation for each and every one of that zillion pings that each and every ping was incorrect and has been resolved (it wasn't literally a zillion. it was about 32...).- IRS transcripts come back, revealing that there was a shady family member CPA committing tax fraud for years and the IRS said they owed several hundred thousand dollars.