Assuming we have to do it that way, we intend to quit claim it into the LLC afterward (acknowledging the risk of due on sale clause).What am I missing?

Lets assume there is a medical property like a dialysis center Davita/Fresenius with 1 year left on the lease and 1 - 5 year option to renew. 

People who have service dogs generally don't raise or train service dogs (the cost of which can run $50K, all in).Sounds like a fake ESA - and even then, raising one would not qualify (and if they had a valid ESA, it would cover ONE pet, with letter from doctor, which explains their medical need).

I am also a passive investor in a syndicated medical building.So I know the level of time committment involved with being an active real estate investor and I can compare that vs. being a lender or being a passive investor in a syndicated deal.Yes - being a lender is more passive.

Outside of these claims there isn't really any issue that I can think of.

You can start claiming write-offs once you have an activity with the intent to make a profit.

But cash is king and you dont need to claim it as income!

When the water was turned back on by the water authority, it flooded the house within just a few minutes from gushing water and we are left with an expensive insurance claim.  

It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.Make sure your property manager is a licensed real estate brokerage.Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estateUnderstand you can not eliminate all risk, only mitigate it.

The tenant now claims that he wants to use this deposit for rent payments for January - March.