Whatever the arrangement you come up with NEVER relinquish control of the deal.If you absolutely have to keep them in the deal for the long game them why not give them each 5% ownership in the LLC who will buy and when you cash out structure in such a way that you get 100% of your $$ back first before any profit is distributed.

Earlier this week we distributed rent increase notices to tenants at a property we purchased a couple of months ago here in Kansas City.

Chris,I sold distribution lumber in Maltby for lots of years and had lots of good contractors come in that fly under the radar. 

There's a greater chance of higher returns, as these funds have overhead costs that need to be paid first then remaining profits distributed.   

If not, do I just take distributions every month to pay that? 

LLC allows un even distributions.. so he gets a fee for each sale in the operating agreement it spells out his job and compensation..

You're right, one subaccount is tax-deferred while qualified distributions from the other are tax-free, but the immediate result of the 1099 is the same either way- no taxation. 

The property is part of an estate and it will likely take a year or more to distribute the estate (I'm the executor). 

Have the realtors send you listings, put you on their auto distribution. 

All of these distribution centers being developed here are going to keep the population going up in this area and will make for a good rental market.