And set it up properly so everyone is covered sufficiently.

A properly done rehab could increase value considerably and may open the door to a cash out refinance.

You won't be able to properly run credit reports, background checks, verify that the applicant is legit.

Zero way of giving a proper answer to this. 

Current tenants were given proper legal notice and would be out by 10/5, so the house would be ready to close on 10/8.

@Greg M. yeah totally, I am proceeding with caution and won't do anything until I get the proper advice from my attorney.

We are in the process of starting a few more businesses, only one of which has focus on real-estate, and would like to make sure our structures are in place properly, allowing us in the future the ability to sell or add partners or investors.Any recommendations would be greatly appreciated!

Unless your property happens to already have the proper Zoning for a 3-Unit building, which is based on the Zoning designation and the size of your lot, then you would be very lucky! 

If you've done the proper research, then you know that KT is not ok in any circumstances.

In most cases a proper cleaning will likely do the trick.In regards to the proving it part, I agree with @Jill F & @ John Teachout - you do not need to prove it and smoking smells.