For example, if you purchase a $500k legal balance (unpaid principal + accrued interest/fees) for $200k, then rehab and sell the property for $300k, can you write off the uncollected $200k (the $500k - $300k difference i.e. not pay taxes on your profits, as on paper as the lender, it is a "loss")?

Deed restriction.

They'll also tell you the maximum number of homes per acre, minimum street width, and other restrictions.

Given my current scenario with this recently purchased house, if you were going to rent out to the two friends to offset the cost of the mortgage - would you keep things simple and do this "under the table" without all of the legal paperwork, or would you do this "officially" with all the necessary paperwork and legal forms making me the official "landlord" renting out to two tenants.The way I see it is this.. keeping things under the table would make things simple with my two friends and obviously require less paperwork.

Legally, you would have to purchase the property for the mortgage balance and resell it to the ultimate buyer. 

There’s many legal reasons these days to avoid doing this .

Invoice them for damages, legal fees and get the property for the next tenant.

Of course, the main issue we seek to tackle is how to best limit the liability of the parent company - and the attorneys that we have spoken to claim that 1) "this is out of their league" or 2) are unable to provide any specific insight on the specifics of the legal structure.

Is it recommended to establish a legal entity before starting the journey into real estate investment?

If I show the one in person and call the other on the phone is that ok to avoid any legal ramifications in the tenant search process?