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.

But that is another issue I have, finding a buyer AFTER you go binding vs having a buyer lined up first...but that's for another post. 

The key difference, though, was he spent months carefully getting to know the local architecs, reputable builders, and even a couple of niche design firms that specialize in modern builds for mid- to high-end buyers.

Yes, I have done that several times, both as a buyer and as a seller.

Even without those challenges you had, it was still probably hard to find a buyer because of the use mix.  

;(- if as-is value is less then the balance on the mortgage + arears OOOPS you need to have the owner work with the bank, you as the investor buyer AND a short sales expert often an agent work the tedious and usually failing short sale process. 

Buyers don’t care if you shelled out more on the rehab, if you’re priced too high, you’ll end up sitting on the market way longer than you want, driving up holding costs.Lastly if your buying on market, REO or Corporate sellers are dominating and not as willing to negotiate as owners would.

Then you'll need to find land, acquire it, find a spec home buyer and set up meetings to design plans or buy a set online with mods.

  ( keep buyers from wasting money on DD i suspect)3.

I'm still in the process of growing my portfolio, but have heard others 1031 all their smaller properties into a larger building and have a property management company manage, OR, set up a seller financing deal with another buyer that gives you the cash flow you desire.