Your attorney will tell you that you should put it in an LLC, but then will tell you that you risk triggering the "due on sales" clause. 

Easier to shoot for in active investing (e.g. flipping) though that comes with risk and is more intensive. 

This condo scenarios with many subscenarios including taxes and different risks makes this decision overwhelmenly complex.

Can I still decline and just say that I want to back out anyway without penalty/risk of losing me earnest money?

The bank views a year lease as less risk for them and a form of stability which as investors we know doesn’t equate to security in the real world .

Lower down payment, and less capital at risk per transaction.

@Marc WinterI would say, I would kind of need to structure the deal is such a way, or atleast, considering my financial situation, it would make the most sense and have potentially less risk than using a HML, insofar as the concerns you mentioned can somehow be addressed within the contract.The house in question has an ARV around 225K, around 25K in repairs and I would offer to buy at no more than 140K.The 10K I have to work with would not cover the downpayment on a 140K loan at 10% with a HML, unless I structure the deal with partial seller carryback on a note for 50K payable after the sale is complete, in which case I would need a loan only of 90K which would leave me 1K to cover interest payments, assuming points are rolled into the loan and a bullet loan is not an option.She is my neighbor and I'm on very good terms with her.

It's intriguing but I believe you run the risk of the original bank calling the loan. 

I would recommend looking at your own portfolio and figuring out how much should go to real estate, and then how much of that should go into each of the asset types and strategies, based on how much risk you’re willing to take.

Moderate to Low Risk Areas: Zones B, C, and X -- Lower-cost flood insurance available to all property owners andrenters.