As for tax benefits, an LLC doesn't really provide that--if it's a single member LLC it's treated as a pass-through entity and just treated as ordinary income (minus the improvement/repair deductions and additions to basis you can take for rental property).

Flipping profits are taxed as ordinary income, including SS/Med, and not deferred by reinvesting.

I have 3 patio homes in a single development, and love them.

This is achievable (we've done it with single-family homes) by giving a much higher purchase price. 0% interest is good for the seller because they will get taxed based on the long-term capital gains rate, as opposed to the ordinary income tax rate if they're collecting interest payments.

Generally, flips are taxed at ordinary income tax rates.

This enables you to defer the payment of your ordinary income, capital gain, depreciation recapture and/or Medicare Surcharge (“Obamacare”) income tax liabilities.There are important timelines and rules you must follow in order to successfully complete a 1031 Exchange.  

It sort of worked, except now, I'm left with what will be ordinary income when I take it out. 

I have occasionally tried getting in contact with one of them to try to find a flip deal and I can't tell you I have had an ordinary interaction yet!

Currently the place is a duplex, both 1/1's and my wife and I are living in one side which is the one I'm considering enclosing the patio on. 

The fix n flip would not qualify and that will be ordinary income.