Faced with these burdens, many owners choose to limit their renovations to cosmetic work or, worse, proceed without permits to avoid triggering the requirement.This raises a crucial question: which is safer—a fully gutted and renovated building with modern electrical and heating systems, rebuilt to 2025 code but without sprinklers, or a building where the original, outdated wiring and heating systems remain in place because owners chose to avoid triggering costly sprinkler requirements?

In this case, the LLC will file taxes as a pass-through entity, meaning the income or losses will be reported on your personal tax returns, and each partner will report their 50% share of the profits or losses on their respective individual tax returns.To make sure you’re doing things correctly, I recommend consulting with a CPA who specializes in real estate investments, as there may be strategies to mitigate tax liabilities or specific deductions you can claim related to the flip.

The loan is non recourse, so I have no personal liability.  

Geesh.The Broker also who wrote those contracts and advised their clients to make these deposits most certainly has some liability here. 

Business entities are US state law creations: LP is a limited partnership. 

Once you have the place under contract you are time limited.

@Tim RogersI believe there are income limits that if you exceed specific income (cannot remember the number) it greatly reduces or zeroes out any deductions from a REPPeople a lot smarter than me can confirm

So it does appear to be possible to get an FHA 203k loan for a 5-unit & convert to a 4-unit.When possible, aim for the Limited (aka Streamline) 203k loan, as it's less complex, not required to get an FHA consultant, etc.Of course, this is based of the two following important assumptions:1)  zoning allows for this2)  and obviously I owner occupy for at least 12 months3)  the total purchase price + renovations are within the FHA loan limits specific to my areaWhat I'm confused about is the timeline or chronological order of the process? 

I do not live within the city limits.

Personally, I wouldn't open up a home that isn't in good repair, from a liability standpoint if nothing else.