I got a proposal for following deal and this is my first time to invest in multi-family venture and would like your feedback on how to structure the deal.Property: 21 unit + 2 unfinished. 

What I want to know is: How do investor structures their seller financing? 

I could structure the deal to be able to sell the MLO before the option period and base it off the cash flow and future purchase price though.

Generally, materials are broken down into two categories:Rough Materials (lumber, nails, screws, brackets, piping, fittings, mortar, wiring, outlets, switches, drywall, etc.)Finish Materials (tile, grout, flooring, paint, light fixtures, plumbing fixtures, door knobs, etc.)The way that I structure my contracts is that I buy the finish materials and have my Contractor provide all rough materials.I think it's strange your Contractor wants you to buy piping, brackets, etc, because I would classify that as rough materials.There's no way I would ever want to be responsible for buying all of the piping, fittings, elbows, p-traps, etc for my Contractor...I would be at Home Depot all day buying and returning stuff! 

Have you looked at the gift tax implications to such a structure, or the deductibility of interest payments?

Loan terms for this transaction structure are excellent and now is a good time to lock in a low 10-year fixed rate on the financing.

Unless I'm missing something I don't think the issue has anything to do with your entity structure.

For rental properties ... do lenders require your insurance to cover replacement value of the structure or just a typical “landlord” policy?

Multi-members LLCs are very hard to estimate unless you know exactly what you want in terms of structure. 

Your housing systems: heat, electric, water, structure should all be functioning correctly - check those.