@Sharvil Patel1 is incorrect because of 3.5 is prohibited in many jurisdictions or at a minimum causes insurability issues on future transfers.

That just seems incorrect, as if it was written by a bot with city-data as its source.

Correct any incorrect property details now; if it's not listed properly, it's a waste of time and could result in claims of 'bait and switch' and the like.  

Unless I am reading your post incorrectly, I believe your statement on "avoiding capital gains taxes" is incorrect.

I am very sorry for my incorrect statement in the post above.

I have had instances when underwriter used incorrect data and I saw that the numbers don't add up then I would demand to speak to underwriter & review their calculations.

@Heath DonnaldWhat you did is incorrect and a little bit messy.The owner of the property(whoever is on title - you or you and your spouse) should be making the payments for materials/rehab/etc.Your purpose for creating the LLC was liability protection - you should consult with your attorney but you likely didn't take the proper steps to get the liability protection afforded by the creation of the LLC

The contractor/builder put the foundation in incorrectly (to MD standards and not DE, per the blueprints) and had to redo parts.

Based on gross income (actual rent), vacancy is already factored in, correct?

You are incorrect about this.