The rural one required 35% down.

Given you aren't clearly a prorata split of everything (IE both names on title, mortgage, etc), Partnership treatment would be much more supportable than as a TIC.If you have an agreement in your JV that you are sharing the expenses and revenue of the venture, the JV certainly gets to claim those valid expenses, including the mortgage interest.If the property was never in service and was being renovated, that interest may not have been deductible anyways and it is possible it could have been required to capitalize it into the renovation, in which case you'll recapture it by your share of depreciation.

As my wife and I are both over 45, we require a distinct approach to ensure we can retire within the next 10-15 years without having to work, particularly in physically demanding jobs, until our final days.

You would have ongoing filing requirements with the State and would need to keep business records and documentation.

Even 'builder templates' or stock plans will require their own trip through the City for permitting.

From what I remember, Utah residential code does not require foundation drainage and therefore, no window well drains (where would it go?).

Recording it will require you to pay off the loan in entirety in most cases unless the new bank is willing to allow the remainder of your private note to subordinate in 2nd position which most national banks do not allow. 

You can get a judgement against him, but to to get a lien on his property would require much more than a judgment. 

Your return on a real estate investment is Cashflow and Appreciation.It appears that your cash-flow is negative if you assume the current FMV.The question on whether to keep or sell it is what your required rate of return and what is the appreciation rate on the property?

While this may exempt it from being classified as a rental activity, active participation remains a requirement, necessitating compliance with three tests: spending 500 hours on the property, dedicating at least 100 hours (and more than any other participant), and performing all the necessary work needed.Additionally, long-term viability and consideration of depreciation recapture are important concerns.