Always good to see how each sponsor is structuring their deals as well. 

Rents, yes 100% I do adjust billing and it is above standard tenancy rates because they are doing it for business revenue. 

Are there many REITs that currently regularly engage in this type of feeder based structuring for a investors?

Additionally, regarding the legal structure, an LLC seems to be the most suitable option for our situation.

I wonder how they are structuring these ? 

I'm going off the understanding that you still need to spend 500+ hours in the business to achieve material participation (please correct me if I'm wrong). 

While the cost can vary depending on the scope, zoning, and materials, I’ve seen similar projects run anywhere from $50,000 to $150,000, depending on factors like plumbing, electrical upgrades, and structural work.If you’d like, I can connect you with a few contractors or architects in Chicago who specialize in basement conversions.

I have been working on creating more passive RE opportunities and have come across a unique equity financing structure.

The new people don't know and they are the business target.

That is a very dishonest way to operate your business, and will get you a bad reputation and lose you money.