@Yooni Choi managing from out of state (OOS) with ZERO previous landlord experience - probably won't go well.You WILL make a lot of mistakes that will cost you money.

We do have to come up with 40-60% of the LTV through investor money!

I'd rather have a property remain vacant to I can spend time cleaning up and getting it ready and back-online so it could be available for someone else to rent.

If I were the neighbor, it sounds like I'd be the only one bringing money to the table so you could get something you want.

The only thing we can think of is he deals with a lot of international trade and money and maybe it’s OFAC we just get a scripted message every time we talk to someone so we got lawyers involved. 

That likely means that they are not good with money management which you are likely expecting from him.To answer your question, if you are doing long-term rentals, the LLC taxed as a partnership is likely the go to route.Best of luck.  

private money lender How did you add value to the deal?

If so, they can sell within 2 years and not pay capital gains taxes on the sell of the home.They could take that money and buy multiple rental homes in other areas if they wanted, or use the money to downsize in to a different home while still having money left over.

I've never spent money on inspections/environmental before having the property under contract.

The other investor may be bleeding money and they don't even know it.