You claim they are bad landlords, but you insist on staying.

I wouldn't necessarily give the tenants all that detail and copies of receipts, but you will need to have it if your assessment is disputed.FWIW, for severe damage, many landlords will stop at the maximum allowed by small claims court, because going to a different court becomes expensive.

They say that HUD has 1 year from foreclosure to make the claims.

i stand by my claim, Most sub-to are not low down options.  

Do we need to do anything to change it or can we just file a 1040 next year and claim it as a single-member LLC on our return?

I’ve been with the same insurance company for 5 years and never had a claim and likely won’t make a claim unless I sustain a large amount of damage somewhere.

We have rental properties in various LLC's and until recently were under the impression that the deductions we could claim against my W2 income was limited to her percentage interest in the LLC's (i.e. since we are 50/50 members in the LLC that only 50% (her share) of passive losses can be deducted against my ordinary income.  

Its hard for you to claim in court that you didn't intend 10 days.

You may have the tenant on a technicality in that they didn't report the broken disposal and can't claim they didn't have time since they had time to pack their belongings and move out.

You'll hear a lot of YouTubers claim you can build an empire in one year, but it's just not realistic.