How would I distribute profits or will it be considered pass through income at new lower rate?

@Pandu ChimataThe issue is tough because if they are up there in age - they may want to pass down the property to their family with a stepped up in basis(avoiding the capital gain's tax).Seller financing is a technique to lessen the burden of capital gains tax. 1031 will also defer the gain...but this doesnt seem to be an option if they are looking for cash to retire on unless they 1031 to a smaller house.

Can we setup a mortgage to the LLC identifying two or four different individuals as the payee or do we need to set-up separate LLC to handle distribution to and from?

@Mike S. this technique is how you will leverage your equity and grow your portfolio faster.

The PM collects rents, assesses their fee for collections, then distributes the remainder to the owner.But yes, if you're going to offer a property management service you should expect to manage the entire property.

I started by getting sellers to seller finance the sale and still use this technique as much as I can!

Hi, I  bought my home(Bayonne, NJ) around Dec 12 ,2016, tax for 1st quarter 2017 was already paid by previous owner, so I paid that amount in closing of home then for the remaining 3 quarters I paid via Escrow account...

I rather be collecting the dumb money during the next correction than being a part of that distribution pool.

However, like the person listening at the gym in @Joe Splitrock's story, most people I talk to are definitely not interested in applying this technique to their own life. 

Please do not take properties from other wholesalers, mark up their prices, and distribute to your book of investors without having it under contract yourself.