Being that we both have individual assets to protect, an LLC would seem like a no-brainer, except for the fact that setting up an LLC would rule out conventional loan sources. 

@Kevin Buck As others have said we would need more info in order to properly assist you, but, your friend should look into the rules of the HOA first to see if the property can be rented (if he hasn't already). 

Thanks, Bryan Clement  FYI the mortgage industry is still using the decade old FICO models, not the most current ones (queue 50 borrowers a month: "But my Discover Card says it's 30 points higher than what you just said!"

If you ever mention the 70% rule I will hunt you down and disown you!

Transfer tax is now 4.278%, typically split 50/50 by the buyer and seller.

I'm 50's, so if I were to reflect on what would I have done differently, here is what I would do if I were you now.

@Henry Lazerow I'm not a lawyer but Chicago has something called Home Rule which my understanding is that it's laws and rules are not necessarily governed by the State of Illinois. 

Ive had about 50 or more inquiries on my rental over the last two weeks.

By doing a very simple and not exact DTI calculation I'm coming to 50% on myself, but 24% with my spouse's income included.

Talk with a custodian on the 1031 plan so you know for sure the asset you're buying will conform to the rules.