The transaction will not constitute as an "arms length transaction" and may cause issues for you.

If there is any kind of damage to the house because of a natural cause if you approach the insurance company without a landlord's insurance they will outright deny your claim.If you have a mortgage the bank will insist that you have landlord insuranceTenant has renter's insurance.

@Thomas FarrellRecommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

I have lost a lot more $$$ to tenant damage than to unpaid rent.  

There can be specific issues that can cause the distribution to be taxable related to partners having enough basis / debt basis to distribute the proceeds. 

But ultimately the responsibility lies in my hands.I jumped on a seesaw of risk hoping that the momentum would catapult my bank account into six figures only to find out the hard way that flipping houses isn’t as easy as I had predicted.This house was purchased for $64,000 with an expected rehab of $100k to $120k depending on how much work the dilapidated and neglected house needed.The midwest is lovely but the houses carry the weight of weather storms nearly a century old leading to more damage than a beginning investor could expect.The appraisal came in at $225k for my lender meaning our all-in cost would be around 85% of the sales price worst case.

Sellers may struggle to mentally shift from "owner" to "tenant," which can create challenges with boundaries and property care.Security Deposit:If you’re doing a temporary leaseback, be sure to collect a substantial security deposit to cover potential damages and ensure they vacate on time.

PIf it didn't smell when the tenant moved in, and if the trap hasn't dried out from non-use (or even if it has), then the tenant probably caused the smell. 

Quote from @Evan Polaski: @William Coet, what can cause a total loss in syndication?  

Since RAD has someone on the forum they can respond to this, my question would be you make some pretty damaging statements there, do you have any dates etc. you can refer to like the cookout at XYZ on this date or the party at ABC on this date or ABC drives a blank model company car...