As mentioned if the holding company is not solely holding or owning assets together funneling monies as a loan would further complicate if there is a default but also cause you to file extra tax returns = $...Yes you are taxed on interest income or any money that you make, does not matter how you structure it, what comes into play is not how much your taxed but how much you pay someone to figure out for you how much you need to pay and each layer is an added cost. 

After some research, I've come up with the following:- Blown-in insulation to fill the joists with hard-packed cellulose- Add asphalt panel board layer across the entire ceiling to the existing drywall and fill the cutouts. - Add a second layer of 5/8's drywall to the asphalt board. 

@Joey Samudio, I'd recommend buying the asset with a normal 1031 exchange and then layer on debt for rehab after purchase.

People don't like to talk about this in real estate investing circles, but it's vital to your mindset.

The 1% ownership will still allow me to legally manage my properties but it will help create another layer of protection having the management vs ownership LLC. 

We have added layer upon layer of complexity to keep it working, to the point now where it's a mess that nobody even those administrating it get anymore.     

Lastly as an illegal unit it is  huge liability if there was a trip and fall claim, fire etc your insurance may not cover.I recommend renters insurance for whoever lives there is mandatory to add another layer of protection. last option not considered is you living in the bonus unit to have a free place to live with minimal risk 

It also makes cleaning easier, as you don't get that layer of nastiness where the sink meets the counter.But, if this is a low end, low rent type area, probably best to do it as cheap as possible.  

I love how you point out that there is more to research than just the cash flow.The PPM is a vital resource to learn about the offering.

Real estate investing has many layers, from financing and rehabbing to tenant management and taxes.