This is due to a special rule under Revenue Procedure 2002-69 that states that a LLC owned by a husband and wife in a community property state is also considered to be a disregarded entity and for tax purposes, the property is treated as if it is owned directly by you and your spouse.

He said we he would split it with me 50/50.

As with any For Sale By Owner (FSBO), some are good deals (meaning they easily exceed the 1% rule) and bear out a good ROI after more rigorous analysis.  

In many ways, it's good to have strict rules in place because some owners aren't properly insuring, paying the right taxes, might not get business permits or simple things like fire extinguisher inspections. 

You'd still have to put up some of your own capital and give up some upside however you'd take massive risk off the table.Another option; get a 50% LTV 1st Mortgage and use the proceeds to buy more properties that generate income day one.Land development is a high stakes game. 

@Philip Olivier  The city shutting off the power was when they started enforcing the new rules for short term rentals 2 years ago or so ago. 

Unfortunately, unless the money is gifted, it is not as simple as them just writing you a check.Passive investors receive at least 50% of the deal, and usually even higher based on your experience level.

Just bought a 50 unit in EaDo for under $40k/door.

For those reading this, if you fail to follow the rules regarding LLCs, they don't do you any good.

Here are some rules to follow to mitigate risk if buying at this point in the cycle:Buy for Cash FlowMake sure your asset is spinning off plenty of cash to the point that you can experience a year at double the average vacancy rate and still be cash flow positive.