We are going to spend the first month of ownership cleaning the property up and addressing any key areas to minimize operating expenses throughout the lease term. 

Any feedback on how to structure the transfer of the $400K to minimize tax implications for both of us?

Location will minimize your issues.  ;-)

In regression, you would try to find the continuous line that goes through all 100 points while minimizing total error from the line to each point (hence why in regression it's called the "line of best fit"). 

This will help to minimize future pain.

Letting your money sit in a minimal interest-bearing account isn't doing much to better your circumstance.You didn't disclose your familiarity with real estate, so if you don't have any formal education, I'd suggest taking on a mentor or meeting up with ACREIA (join their Facebook group).

There may be a product in the near future that will allow a property’s owner to show proof of a lease/rental on the property to allow the landlord to only pay interest on the mortgage to increase cash-flow and in turn have the ability to apply lump-sum payments to the principal at no or minimal fees.

I could add a bathroom can light connected to the vent at minimal cost.

*I am just starting to put money away as I cleared all of my debts in the last half year.Debt-$0Salary-$75K gross, which is $52.5K NET + an annual bonus of a few thousand with excellent benefits-health insurance premium, phone bill, gas/grocery discounts, and 40% of my meals are covered.Monthly/annual Expenses-Very few expenses right now...Groceries are minimal, gas/car insurance only 7 months of the year, and I live a very simple life.

*I am just starting to put money away as I cleared all of my debts in the last half year.Debt-$0Salary-$75K gross, which is $52.5K NET + an annual bonus of a few thousand with excellent benefits-health insurance premium, phone bill, gas/grocery discounts, and 40% of my meals are covered.Monthly/annual Expenses-Very few expenses right now...Groceries are minimal, gas/car insurance only 7 months of the year, and I live a very simple life.