The zipcode 31405 overall rating on niche.com is B-.Rental - $950/mo (currently rented)Down payment - 25% and Interest rate is %5.5 , Excluding (P&I, Taxes, Home Insurance, Vacancy Factor, Property Manager Fees, Reserve Repairs ) I see $180-$200 Cash Flow Income .Based on the inspection report there are some immediate repairs ($1200) , the seller is replacing HVAC and the roof is 10 years old .

The zipcode 31405 overall rating on niche.com is B-.Rental - $950/mo (currently rented)Down payment - 25% and Interest rate is %5.5 , Excluding (P&I, Taxes, Home Insurance, Vacancy Factor, Property Manager Fees, Reserve Repairs ) I see $180-$200 Cash Flow Income .Based on the inspection report there are some immediate repairs ($1200) , the seller is replacing HVAC and the roof is 10 years old .

Eddentially what you want to do is transfer the property into a Land Trust, which is excluded from the Due on Sale Clause, and then assign the LLC as the beneficiary. 

Generally speaking, you are entitled to exclude up to $500,000 for a joint return if the house is your principle residence in 2 out of the last five years.

That said, I think you are talking about Section 121 exclusion which broadly says you can exclude up to $250K ($500K for married couples) of gain on the sale of your primary residence (lived in for at least 2 of the last 5 years).

When they sold the place, did they explicitly exclude you from performing an inspection?

Would we be able to exclude the entire gain on the home given that she lived in the property for 2 years (~25 months) out of 4 years (~46 months)? 

Some items are excluded for investors.

@Luis M DiazYou may be eligible to exclude a portion or all of the gain if you lived and owned the house for 2 out of the last 5 years.

@Shane B.Selling primary residence = potential tax savings through section 121 exclusion($250,000/$500,000 of gain excluded).Holding new multi-family unit in LLC = expenses related to the vacant unit will not be deductible if you plan to use it for yourself.An attorney can provide guidance of liability protection from owning the property in an LLC.