Most costs incurred prior to that point (assuming it was purchased vacant) will be added to your basis of the property and capitalized, not written off. 

I find it extremely important to know and track your numbers on a consistent basis.

Lenders have mentioned that they have minimums for each loan's underlying asset - either a sqft minimum (750sqft) or an appraisal value ($150k), or both - neither of which those parcels meet on an individual basis. 

If that happened on a regular basis I can see how that logic would be solid.

There are a few other rules that the taxpayer must also satisfy including excess business loss rules, at-risk rules, and basis limitation rules.

While you shouldn't change qualifications this may be the time to test your pet friendliness if you are willing by accepting pets on a case by case basis. 

@Laura Chevalier about your original post, I would simplify it the arrangement   1) the business should be capitalized to the extent that neither of you need to contribute additional funds on a monthly basis   Capitalize with adequate reserves and pay monthly expenses out of the cash flow.  

Selling from X LLC to Y LLC no matter the reason probably means the IRS will want their capital gain tax and your basis goes to the value at date of transfer.   

Every day do something little and don't stop.

Smaller buyer pool for 2 bedrooms but they sell every day.