It also protects your share from attacks from judgments or tax liens levied against your friend and his LLC. 

@Levi T. how hard is it to set up an LLC? 

@Levi T.

Being that we're in WA you'll want to look at excise exemptions if you go that route.For your partnership question: I've seen money partners get a certain percentage on the equity side (whatever is negotiated) plus a guaranteed rate of return for their invested capital.

Levi Johnson

The reason Bob did not buy the property outright from Mike is because the end goal is to fix and sell, so it seemed silly to pay excise tax twice, also there was a lien on the home and Bob did not want to fool with financing to acquire the property to just turn around and sell.  

@Levi T.

Starting November 4, 1992, districts must have voter approval in advance for:(a) Unless (1) or (6) applies, any new tax, tax rate increase, mill levy above that for the prior year, valuation for assessment ratio increase for a property class, or extension of an expiring tax, or a tax policy change directly causing a net tax revenue gain to any district.’This is obviously a new tax which has been levied without voter approval.

As far as compassion goes...what is the legal precedent for a special compassion tax to be levied on landlords?

I remember reading a BP post about how to have a property transfer count as a sale without triggering all the normal excise taxes and such.