Correspondingly, all business income taken from an LLC under similar circumstances is subject to self-employment taxes.

Before you even consider a trip to court (and I'm not sure why you'd consider this option at this point anyway) you need to be aware of your options as a tenant in your state in terms of what you can do if a landlord does not address repair issues to make a rental unit "habitable".You also need to be aware of just what limits a landlord must go to to achieve this.Colorado does allow a tenant the right to withhold rent IN SPECIFIC CIRCUMSTANCES if a rental unit is "uninhabitable". 

FHA limit I believe is 6%, maybe not that much in certain circumstances, and a 203k may be different.

Of course, if you plan to have a child under the age of 6 live there, you HAVE to get it fixed as they CANNOT live there under any circumstances.

At the same time, I think the relative rarity of duplexes/triplexes/quads could be a competitive advantage distinct from the hundred of competing offerings in north Dallas.

Based upon my experience, a buyer in a similar circumstance as you will be signing an extension and closing whenever the bank is ready. 

Do you get to split the commision with the sellers agent in that circumstance?

Of course our circumstances are very different so what makes sense for me may not be the same for you.  

All of the comments about not renting to family is the right business advice in the vast majority of circumstances, although I do agree with @michele fischer too. 

There are local hard money lenders who can work with you under the right circumstances.