From the ownership side the advantage is if we project the numbers wrong and the value is less post-renovation, my all-in cost is less which makes it less likely to lose money. 

Nothing wrong with his opinion, ours is just different.You should consider both and figure out what works for YOU!

Again in my limited knowledge it seems like multi-family has the better numbers but I could be wrong.

Part of the problem is that I picked the wrong market for exchange.

Well, how wrong were they. 

I could be totally wrong though!

I just want to confirm, I am not opposed to LLC's and have them, but 99% of people set them up wrong by first buying a proeprty, having a loan on it, then just transferring it to the LLC.

So let's see what the net looks like:2421 rent - 242 (prop mgmt) - 2035 (expenses as outlined above) =  (+) 144 / month.So, Nikki proved me wrong - you can find a positive cash flow property with 20% down assuming the rent amount of $2421.As such, this could be a possible play for a new investor who is looking for solely hands off  turnkey. 

Too many things WILL go wrong.

3) STR guests - if something goes wrong on the unpermitted add ons, will it be a bigger risk/issue vs something happening in the permitted portion?