Contract assignments are very common across many industries, including real estate.

You would have to buy that property (or a % of it) and then contribute it into a new LLC.Since you're buying the actual real estate as a tenant in common it does become a little easier to deal with the debt.   

Is there any who has dealt with a similar scenario?  

These people are rooted in common sense. 

It's common to be scared of making mistakes and sometimes you have to do things when you're scared.  

This is a great time to update your lease to (a) a month-to-month contract, so that you can ask anyone to leave if they are messing up the feng shui, and (b) add a non-smoking clause.I have written extensively on the merits of MTM leases here on BP, so you can read about my rationale if you'd like.Here's my non-smoking clause:SMOKING: Smoking is prohibited inside your unit or in any interior common areas.

I would like to know what all qualifies as completely clean here- Electrical wiring is normal and no unlicensed modifications - Structural inspection is also clean.Seller is ready to discount the price by ~20% from market plus the cost to repaint the whole house What are other questions to ask and things to consider in this scenario?

You can then share with tenants upfront what you'll do in each of these scenarios so there's no surprises.

If caught, best case scenario is you'd get a cease and desist letter from the state regulator and probably fined. 0% chance this is worth it.

How does a 1031 exchange work in this scenario?