I think it was for down payment and closing costs.

(So unless they sell for much more than they paid they will only get a small percent of their down back, especially after selling costs,) but you did say they were getting a discount.

With your costs being less you can invest more into the property to build reviews and get bookings. 

It's the cash you put in that's your cost for the property. 

The seller's LLC pays capital gains tax and depreciation recapture, while the buyer's LLC uses the purchase price as the new cost basis.

It's a good practice to overestimate costs and underestimate after-repair values (ARV) to keep your expectations realistic.

What are the pros and cons of each, and which offers the least restrictions, flexibility and cost savings for my intended purposes?

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

. :) A zoning change can take up to 6 months, approval isn't guaranteed (despite Aldermanic support), and potentially cost a lot of money (architectural site / floor plans & dimensioned elevations, zoning attorney, holding costs, etc.) 

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.