First, banks do not prefer W2 income over 1099 income at all.

I’d suggest starting with local credit unions or community banks—they’re often more flexible with investment properties.

He is very good about deductions on tax returns so his income looks negligible and of course banks wont talk to him about loans.

This is how banks verify property owners maintain insurance.

@Drew Sygit Trying to understand paying bank this loan rate is good idea or payoff principal early is a good idea.

That's how the banks do it.

Alternatively, if the bank ( assuming there is a bank) is fine with it, you could negotiate a credit and escrow the funds to be released after you do it yourself.  

Raising money is all about marketing and sales (not real estate specific) so either hire marketing agency and read sales books, or hop on some LinkedIn courses on marketing and sales.Not sure the legal structure to use: talk to accountants and attorneys.Need deal flow: talk to brokers and go to a lot of networking events.Lending terms: start calling banks and loan brokers.From there, it is all risk mitigation. 

-Local banks were the best.

Just like a bank tells you what the terms are, not you as the buyer.