We have been a quality fencing company for 5 years part-time, and just announced this year we are going full-time with it. Looking to learn anything and everything about the commercial world to hopefully one day be ab...

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). 

I am seeking advice of what to do with the money from someone who exit the business and successfully got similar income and appreciation of capital.

So you’d be hoping to make $200/months for dealing with 3 x as many tenants, vacancies, tenant on tenant conflict, late payments, etc etc. . 

Not sure about mixing seniors and 20 somethings there may be conflicts over noise and common area cleanliness.

im in Orange County CA and there is a huge market here for room by room rentals here. i've been doing this for quite some time (over a decade now), and it certainly has its pro's and cons. my advice if you go about this is make sure you do proper vetting before moving someone in... not only for financials/ credit-worthiness, but also for temperament and expectations in a co-living space. we ask a lot of questions like "how do you handle conflict?"

I will be able to log the 50% time of business use.

A business line of credit through your LLC protects personal assets, builds business credit, and may allow interest deductions, but it might be harder to secure for a new LLC.

In the latter case, I would still use QB to enter info provided by the 3P servicer and to maintain my general ledger for the lending business.

I do see the point @Steve K. and others are making about the annual turnover and low monthly rent being in conflict.