Work with a real estate attorney to draft a formal agreement that outlines responsibilities and protects both parties. 

While no formal laws say this is restricted, we are getting notices saying the request is not feasible due to XYZ concerns.

This is often achieved with written documentation, such as a formal ROW request from TxDOT or other correspondence indicating that condemnation proceedings were possible if no settlement was reached.

If someone stays at a property for 14 consecutive days or more, they could potentially be considered a tenant under state law, even if their stay is structured as short-term renewals.If the individual is classified as a tenant, landlord-tenant laws would apply, meaning you may need to follow formal eviction procedures to remove them.

Be sure to follow all formalities, such as sending via certified mail if required.Transfer Rent Payments: Notify tenants in writing that rent payments should be made to the new property management company moving forward.

By the time a property is formally put up for sale in a town that size the locals have know it was going to be sold and had their chance at it.

Ensure separate bank accounts for the LLC, and maintain proper formalities to avoid liability issues.

So if I understand this correctly, by qualifying to extend the 5 year rule to 10 yrs, $250k if single or $500k if married of proceeds from this sale would be exempt from capital gains? 

I'm imagining something more like add a wall, turn a bedroom into a kitchen-living on one side and a formal dining room into a bedroom on the other side, maybe add a half bath in each unit.

If you are looking at FHA because of credit score, then I would work on credit scores to qualify for conventional financing or see if you can get a very strong coborrower with high scores.