Hi Clay - Fix and flip is considered as ordinary income and subject to normal tax rates and self-employment tax.

Get a few quotes. and if you do not do it, when you go to refinance into a long term loan the appraiser will likely mark the report as "subject to" a structural engineer report of the foundation. and you will not be able to refi until you have done the  work that is required. 

This is two years late but I happen to know quite a bit about this subject.

Your debt % is 50%, therefore, 50% of the net income (income after expenses, including depreciation), would be subject to UBIT.

Even if you create a non-CA LLC, if you are managing the business from California, you will likely be deemed to be "doing business" in California and therefore likely subject to CA taxes.

A hard money lender who does NOT require a "subject to" appraisal  (which is an appraisal done with your scope of work in hand, and the appraiser gives you the after repair value) is 100% NOT doing you a favor. at all.

And also, since I am the borrower, am I correct in my understanding that I would be subject to a tax on cancellation of debt which would lower my total IRR.I saw many years ago (like in 2017) on BP that note investors were shooting for 10-12% IRR in a zero-interest rate environement. 

They have low interest loans which make buying their property subject to their existing mortgage a great exit strategy for these sellers. 

Different portions of land and building might be subject to different tax rates or legal considerations.Calculating land and building values for tax purposes is a critical step toward maximizing your available tax deductions from depreciation.

Also weather is a factor as previously areas were subject to a 100 year storm that is now a 20 year storm, which causes insurance to skyrocket.