I’m not a CPA but it’s my understanding that as long as you itemize your income/expenses and keep detailed records you can qualify for the section 121 exclusion but it will on a pro rata basis.

Put a clause in contract that if for any reason he does not have the right to sell the property, he agrees to transfer his INTEREST in the property (say it turns out he only owns 1/3 with two other siblings) for the pro-rata share of the agreed price.Basically, if it is important, talk to a lawyer so that your contract actually works, no matter what comes.

The only scenario I could see is that you charge them a pro-rata on the time they are in.

So, you can’t 1031She could do a pro-rata 1031. 

Created mortgage and note for the private lenders recorded by the title company at the courthouse, with lenders having pro-rata fractional interest in a 1st lien position against the property, with further collateral in the form a personal guarantee by yours truly.Details (Nitty Gritty!)

I assume the investors don't want to be in 2nd or 3rd position on a mortgage, and a tenant-in-common isn't ideal either.Is there any way to do this without having to create a separate LLC for each property and divide the owndership of the LLC pro-rata to their investment?

If that tenant ever goes out the second or third generation tenant might not be national but regional or local in nature and if NNN and taxes are really high above base rent you might have to go lower on rent to land the tenant.If this is a strip center with NNN leases then the leases typically state the tenants WILL ONLY cover their pro-rata share of property taxes,expenses,etc.Example if you had 6 tenants in a building and then 2 go out the other 4 tenants do not want to shoulder the expenses for (CAM) property taxes, maintenance, and management fees above their base rent for spaces they do not occupy and do not generate sales out of.What you do is check BEFORE while under LOI or PSA with a local tax attorney who challenges and appeals the property taxes to see what is the custom for after a sale.

My lease has terms about paying a 150% pro rata rent  if he stays beyond the lease term but not sure how I can enforce that either.

If you dont have water submeters for each apt, just apply a RUBS water billing system (google it) applied as a pro-rata based on the number of occupants in each unit.

Property tax is going to depend on how long you take to rehab and sell, its just a pro-rata share of the year, if property tax is usually 1% annually, and you hold it for 6 months, then its .5%.