Because you are not changing the tax return that reports the activity of the property.But... the IRS holds the position that Husband/wife LLCs can only be disregarded in community property states. 

What other options would be good?  

If they do need financing, then speak with your lender about their new build financing options. 

Example: you can option to have a fireplace with two windows on either side.

I reviewed about a dozen options.

Could a return to independence help lower mortgage rates, or have other positive effects?

You've only owned it six months, so you probably haven't dealt with vacancies, maintenance, or capex, but you should be setting money aside for those things.Your partnership agreement (if you have one) should address exit options.

Are there any options out there that won't tear away the margin on flips?

These small touches can create a memorable stay and encourage positive reviews.Create a Standout Listing: Invest in high-quality photos, write an engaging and detailed description, and highlight features that set your property apart.

Aim for a credit score of 680+ for better refinance options.