Personally I take a financial planning approach and I put most of the decision weight on financials.

From my understanding, you can setup an LLC and designate to have it taxed as an S-Corp to benefit from the tax advantages S-Corps receives.

The R-1 is not really an issue, a duplex may be in an R-2 designation there but the structure is there, it's grandfathered or an approved dwelling being 1-4 SFD.

That will help keep you top of mind when a wholesaler gets a deal that fits.Often times, and this is how I approach it, wholesalers will find buyers, ask them what they want and then go find it.

Often engineers are approached by contractors who have a job they need help on so they know each other in the business.

(though we already have the basic design complete on the website), so they're down the road a bit, but will be great for vaca rentals!

Sounds like you're not too comfortable with the "I'll probably be fine with a quit claim deed after the fact" approach.

How do I approach this?

I am not understanding the risk approach here to the cash down for this property.

A bit better industrial design...