lease option type of set up to with the down payment as a non refundable option payment.sounds like a big enough project the buyer is probably substantial and real.. 

To set up a TIC (tenant in common) for a 1031 exchange there is a legal entity and process that needs to take place.

I thought going in that we would start an LLC but have come to learn that LLC's have very limited lending options for real estate and that our LLC would require us to file taxes as a business because there are 2 of us.

This is the type of work that sets the pros apart from the novices.

We also put some gaming chairs and a couch and a table for classic style Families love this set up because they can leave the kids in the game room and then have fun playing on the pool table or other parts of the house that they’re younger children playing in the game room a mini split to help with temperature control and get really cold at night and really hot in the afternoon in the summertime.

Hello, I'm mostly writing to confirm my suspicions as the regulations are a little unclear/I'd appreciate a second set of eyes to make sure I'm not completely off-base.

But the hot water is limited that’s the main problem I’m looking to resolve 

We've considered home equity loans, HELOC, even credit card with high limit and 0% interest for many months.  

Next, I would look at your state's laws, they may limit how you can bill tenants back for usage not specifically attributable to them.

If you are installing them in 2024, the amount of bonus depreciation is limited to 60% and you can therefore only take 12.75% in the first year (plus normal remaining depreciation for a part-year asset).I'm not sure how the split would work between the residential credit and the commercial credit as this may be reported separately with the partial business use allocation happening first.