Of course not, you still have a legal tenant.

We are looking for a real estate wholesaler or agent that knows the area well, a reputable property manager, and a legal/tax professional who can help us set up the right structure for tax purposes.We're also eager to learn, and the US market is quite a bit different from the Canadian market right now. 

Is my criteria legal? 

Just to add to what has been said here - if the seller described this as a triplex on the sale documents, they might have a legal liability.  

I’m currently leading a luxury condo project in Cabo San Lucas and looking to expand my knowledge in real estate syndication.I’d love to hear from experienced professionals about:✅ Best practices for structuring a successful syndicate✅ Key strategies for raising capital effectively✅ Navigating the legal and financial aspects of syndication✅ Lessons learned from successful (or even challenging) syndication experiencesI’m here to learn and connect with like-minded individuals who have expertise in this area.

You should consult an attorney or CPA for your specific situation.An LLC is useful for two things: anonymity and legal protection.

@Frankie Lotrec if you have an existing loan on the property and you plan to legally convert from a 4 unit to 5 unit , you should check the loan documents because you’d essentially be converting it to a commercial property, since 5+ units is considered commercial and subject to different appraisal approaches and so it would rule out the property being considered for purchasers utilizing residential financing.  

We now are looking to create an LLC and setup the necessary legal documents to protect both parties and layout the terms of the agreement.

@Roger Kim If your friend qualifies for the Section 121 exclusion, he can exclude up to $250K of capital gains, but gifting you the proceeds won’t legally avoid your tax liability.

I had access to a legal and compliance team to assist in doing such, as well as my background in contract law.