He just informed me today that he is setting up an LLC to be a consultant/private contractor for work.

Always consult with your attorney before you rely on the above information.

@Jacob Michal When unfamiliar with how to handle a deal, you can do 2 things:1: Consult your local real estate attorney or title company so they can hold your hand and walk you through the process.

In my experience flood planes can be a total headache but sometimes there are ways exceptions in the code that still allow you to continue with construction - might just have to adapt a bit.I'd consult a local architect that has experience in flood planes.

I'm about to start "house-hacking" my home for the first time and I'd like to consult a licensed attorney that specializes in Housing Laws in California, specifically the Los Angeles area.

I have been through the local eviction process with individuals but even my PM company has not been renting to other companies and I would consult an attorney before doing so just to be safe, that is what I recommend that you do.  

Your plan definitely sounds doable, mainly because the maximum mortgage limit for Nassau County is $726, 525 for 1-Family Dwelling, $930,300 for 2-Family Dwelling, $1,124,475 for 3-Family Dwelling, and $1,397,400 for 4-Family Dwelling.Your 3.5% down payment will be based on total loan amount, which includes purchase price + rehab costs (remodel, consultant fees, title update fees, inspection fees, contingency reserve, etc.).

Original plan was to repair and continue to rent - but he has been working with a debt consultant who suggested it would best to just walk away as he has some CC debt he could roll in as well. 

has anyone ever taken a fee as a consultant, stager, etc?

Then, after charging you $5000 for the initial consultation, research and feasibility study, he will recommend an offering utilizing Reg D, 506 c instead as being less expensive, easier to sell, less regulated, and have a much better chance of success.