They'd like to avoid either scenario.My thought is to have them spend the money to get the house livable (adding a means of heat and turning the water on, dealing with any issues that brings) then pass an appraisal and get either a heloc or cash out to fund renovations. 

As to your question about the LLC, this is how I break it down for people looking at real estate investing and asset protection - I call them the pillars of asset protection. (1) Avoid high liability actions [this is more of just executing common sense,] (2) find a great insurance policy, (3) compartmentalize your assets [LLCs, C Corps, etc.,) (4) separate your assets from your operations [operations contain the most liability,] (5) introduce layers of anonymity to hide your assets from prying eyes.I approach these issues from the mindset of being an investor myself, so it all has to come together in a way that is profitable.

Property needs to be in your name, not LLC.Speaking of LLC's: in my opinion a bit overrated to start out, as there are better ways to minigate your risk and avoid certain disadvantages such as commercial financing.

Having said that....we want to TRY to avoid using them whenever we can! 

I would find a buyer or 2 that you trust where you can talk to them about a property that you are interested in and they will usually be able to tell you if it is worth pursuing, so they above situation can be avoided.

There are ways to avoid part of that.

However to avoid it becoming to complicated or even a becoming considered a security I would not guarantee to pay down the principle, I would just do that personally so it doesn't balloon and if it did there wouldn't be much needed.Always with my best,Christopher Richardson

The info on the 3 year mark to avoid cap gains taxes is really helpful info too!

If you need more detail here it is:Benefits:A) Temporary deferral(possible reduction)of inclusion in gross income for capital gains reinvested in a Qualified Opportunity Fund (QO Fund)■ Held for 5 years - 10% of capital gain is avoided■ Held for 7 years - 15% of capital gain is avoidedB) Permanent exclusion of certain capital gains from the sale or exchange of an investment in the QO Fund.Example:A sells a property and realizes a gain of $1 million on Dec. 1, 2021.

Many landlords will do anything to avoid a tenant tern over like it is some type of plague.