On June 7th, we sent an itemized list of deductions via text; he responded on June 8th, disagreeing and threatening legal action.

If you are a legal property manager in your state the owner should have the unfettered ability to allow you to act as his/her agent to enforce the lease, whatever provisions they may contain plus whatever your state laws allow.

This is for basic informational purposes I am not an attorney and this is not legal advice.First, if you offer to purchase a property using a HELOC to fund the purchase you cannot later back out of the agreement because you couldn't find PML or investors.  

An LLC is useful for two things: anonymity and legal protection.

I will preface this with the fact that I have a legal background, specifically with estate planning and asset protection.

Give proper legal notice of non-renewal and get them both out.

Are there other legal or financial consequences I should be aware of?

Additionally, regarding the legal structure, an LLC seems to be the most suitable option for our situation.

I think hard money lender to take this risk cannot legally charge appropriately which means the law is working against you (the law meant to protect owner occupied owners from unfair loans).I agree with @Jay Hinrichs that your best option likely is to sell on the mls.  

Hi Krista, Yes you need a broker's license to legally manage property that you do not own in CO.