His SD will cover Oct rent (and damages) and partial coverage for Nov if I don't have a new renter.I have to do a SD accounting within 21 days. 

If it produces more energy than it consumes then the building is Net positive - though Net Zero is too frequently used as a blanket term to cover both these cases.Ironically, Net Zero does not automatically imply higher energy efficiency - there are several examples of commercial buildings with large expanses of flat roofs (i.e. warehouse) which are net positive, despite the building itself being horribly inefficient.Building standards in North America are woefully outdated on matters of energy efficiency.  

For quick screening, do you use a number higher than 50% when evaluating Houston area properties?  

The following covers the prohibited transaction rules. https://www.irs.gov/retirement-plans/retirement-plan-investments-faqs

Is the initial negative cash flow ok to overlook knowing I can cover the difference AND that the deal will eventually lead to positive cash flow in excess of $100 each unit per month once I re-finance and move out of one of the units?

It might be "6 of 1, half a dozen of the other," but I recommend that the new purchase cover all financing, meaning the mortgage on that house, as well as the financing of the down payment, without having to rely on the first house to pay the debt of the second.  

If they cover all liability and taxes you better call them back right away. 

I would love to gift it to her but we not that rich and that is why we want a formal agreement, just to cover our "investment".

@Annie LiNot sure but if You can you might try for a 203k loan it covers purchase and repairs on  property                 Make it Happen                    Steve

They just  count on insurance to cover their risks.An LLC is not a substitute for insurance.