I ran the numbers on the deal knowing that I would break even on cash flow in the first year with minimal rent increases but significant cash flow in year 6 when the 401k loan is paid off.

You need to understand that given your situation the asset and operational impact must be absolute minimal, lowest risk exposure possible.

And don't expect the compliant tenants that complained to stay after you minimized their concern and did not address it.

I’ve heard different things like taking a Fannie Mae loan out then converting it to a LLC and the likelihood of triggering a due on sale clause is minimal.

What steps would you recommend to minimize damages and resolve this issue efficiently?

Doing a quick scan off I see there are about 5k STRs in Colorado Springs (assuming you are there and not a neighboring town I am gonna say the town has minimal restrictions).

Income, expenses, and distributions are automated and visible to all investors, minimizing the risk of manipulation.This model isn’t for everyone, but it’s a way to give people passive exposure to real estate without the complexity of ownership, while allowing property owners to raise funds without giving up control.Would you see this working in practice?

minimizing free cash flow with larger mortgages or shorter term mortgages takes the cash flow which would be taxed and puts it into the amortization of the loan. 

Focus on cash flow and exit strategies, and consider starting with a smaller project to gain experience and minimize risk.Good luck!

I’m hoping to not build until I acquire more revenue from profits of the plot via flea market, parking, boat parking, or something else that requires minimal investment.