Usually I would think it's easier to have the LLC where you are.In SC I can create a LLC for $110 and not have any annual fees to maintain it.

*Do we charge them rent and then gift that amount back to them (the FMR is well below annual gift limits) or can we gift them rent and still deduct expenses on our taxes?

Essentially, I put myself on a budget plan where I take the annual cost of utilities, divide by 12, and transfer that amount +10% every month into the utilities account.

This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.This example shows that while the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall annual loss.

I desire to make $80,000 annual cash flow income from real estate in one year.  

Maybe give Dad a preferred return to reflect how much capital he has locked up on this deal.IE say property is worth $4m with no debt (keeping it simple), and cash flows $800k annually.

for DSCR = Annual Net Operating Income / Annual Debt-Service in a refinance deal (1) is the Annual Net Operating Income just gross rents?

It's a small property, and there's very possibility for a financial little upside to anyone who leases from you (no farming, hunting etc) so you're looking at annual type recreational or maybe 'off-grid' type tenant.

He's is the only member of the HOA.Two units are being rented out as regular annual rentals.Rest are medium term rentals (90 day) for a local hospital.Sp would that mean you can turn it into an apartment building?  

I do this with my own portfolio by placing half my capital in high yield mortgage notes, yielding me 12 -18% annual; and the other half in real property with often little current cash flow but large appreciation potential.