Not a tough process (unless you stink at your job as a property manager, right?)

-Multi-family here is a little tough to come by.

Tough situation.Sounds like your mortgage forces your hand. 

And does the person doing the labor get paid or only the materials paid for by the partnership?

Here is a video that runs down the basics - https://s-media.nyc.gov/agencies/specialenforcement/01-Legal...There is also a prohibited building list - https://www.nyc.gov/site/specialenforcement/registration-law...Here are some more info overall - https://www.nyc.gov/site/specialenforcement/registration-law..All of this makes STRs in the city pretty tough but it certainly not impossible.

Quote from @Josh Otero: Hi Briar, These are always tough situations.

They couldn't get a construction loan and were constantly blaming the cities being tough on their permit process.

Which material is best?

I understand the basis is all the remodel cost or labor and materials. 

Tough last name to have in the land of the Golden State Warriors ;-)I have a client in Kansas City, MO that has done something similar with one of his larger homes.