@Daniel Dietz,I'm not sure if I understand you correctly but I think your flaw in this proposal is when you say the only one partner will bring money contribution to the partnership.

Our initial research uncovered that the house was purchased about 3 weeks ago by a mortgage guy from Washington state for $499K.

So you can imagine my surprise when we got a bill one month for $4100.I don't know exactly what was done when they updated our meter... but apparently that update uncovered a $4100 balance that the seller owed. 

There are many other issues that a inspection will uncover besides what is behind the partially finished basement walls.  

The entire industry is flawed in its thinking...bridge the gap. 

Also, make sure that you are judging based on actual expenses and not proforma numbers  I would demand that all units be inspected to see if all future expenses will be uncovered. 

Talk about actual $ and it's "Sokath, his eyes uncovered!"

Good luck with your search, it’s a Good place to live despite his flaws.

Anyways, I’m looking for someone to tell me if my strategy is flawed, sound or could be done better.....I am 30 years old, family of 5, six figure income living in a very affluent Southern California city where six figures doesn’t go far.

If you own it for 2 years as your official primary residence (where your driver's license and voting is registered, oh and where you officially live, of course), you'll qualify for the capital gains exemption up to $250k when you sell.Sometimes just having another pair of eyes helps to uncover your options.