Therefore, respectively, I will need to decline this offer at this time.

But I'm borderline fearless in some respects- my only real fear is not getting a return on my investment .

A win for the investor (which can only be determined by finding out what their needs are for being a part of this and nailing it), a win for you (purchasing an asset using someone else's money), and a win for the tenants you are housing (making sure you take care of each and every tenant ethically and with respect). 

With the home being "underwater" in both respects, why would a homeowner want to make their mortgage payment if they can't get their insurer to cover the repairs.

water and food shortages, public transport etc etc etc....have some compassion and make some temporary concessions on being a strong businessman and landlord.I would basically give them a one time "get out of jail free" card for late payment.... make it perfectly 1000% clear that this is a one time deal due to extreme circumstances...don't try and push it or there will be an eviction started.If they have been a good tenant and have had the respect to give you the "heads up" that they were going to have an issue paying on time, that counts for something with me....I know this is business and when you give an inch, tenants will often continue to push the envelope and take a mile...if they see you are "soft" they will exploit it.....but this is an extraordinary situation that just doesn't fit the rules.......

RENTAL TERMSI respectfully disagree with @Robert Marston on his security deposit statement:"It is my understanding that you will pay first/last but not an additional security on top of that unless you have a pet." 

The LLC (being taxed as a partnership), will report the property's gain on its LLC tax return and will issue Schedule K-1's to each partner/member reflecting each partner/member's allocable share of the property's gain.The LLC (again taxed as a partnership), will not actually pay any tax, the LLC partners/members will actually pay the tax on the property gain at their reporting level based upon what was reported to them on their respective K-1's.

I have respect in the marketplace and because I stage and professionally photogragh my listings, I get showings...and offers.

Now, my respective investment scenarios:1.

@Jay Hinrichs  Thanks for responding and much respect.