There are firms that can act as an Intermediary (middle man) to assist two parties (the principals) to achieve certain tax objectives that can't be achieved in a transaction directly executed between the two principals. 

The reason being there's always those that take it too far, allow too many people in their units, huge parties with no concern for neighbors that are residents, etc.; and owners are too far away to actually check properties, so I can see the desire for having owners living close by. 

I was able to build a small team consisting of a third party contractor who is now dedicated solely to my properties, a part-time business manager, and a part-time project manager.

My recommendation is usually to keep each property in a different LLC to avoid comingling assets and therefore risks to those assets, and to contact your insurance provider in order to ensure the LLC is an insured party under the policy.

But also, wouldn't either party be able to borrow against his/her %50 share in the equity? 

that said you can always ask, you can always offer them cash to leave and if both parties (landlord/tenant) agree to end a lease agreement you can always do that. 

If you tried to do that into a different city or state, it is likely something will break.If you use 3rd party property management, it is helpful if you use the same one across your properties because each one has different systems and processes. 

Not sure how large your property is but we outsourced it to a 3rd party billing company. 

The tricky part is "distressed" because estimating the rehab is difficult.

Unless . . . you have signed a contract with a tenant (a lease agreement) or a property manager (property management agreement) which transfers the responsibility to the other party.