If it's a new LLC having done no business, the bank is just going to have you sign a personal guarantee on the loan.  

I'm worried about the potential for repair expenses on the 4 unit, but nothing guarantees no repairs on the 12 unit so I don't see it as safer. 

But I guarantee you, you will win the war to the good.

You have to guarantee the payment to the owner. 

If all does not go as planned (and it rarely does), the only thing guaranteed at the end of the day is the high rate,  high origination costs and looming deadline of your loan.  

If I was in your position I would put my profits in different investments. 1- open up a DRIP plan with a high paying dividend, 2- invest in a few affordable long term stocks with guaranteed growth, 3- invest in peer to peer lending with as many notes as possible, and 4- acquire 4plex investment property and build residual income.

I would check everything out but I would guarantee he lied on his lease.

In turn, you would personally guarantee the loan. 

No guarantees and...even more crazy...although they ask a TON of questions about my rental unit, they ask NOTHING about the type of tenant I want.So I pretend to be a tenant. 

That way, you perform the renovations and are guaranteed to have it purchased directly afterwards.