In the end he cannot keep it if you inspect the property and do not like it, as long as  you do in the periods specified, otherwise w hat is the point of the inspection? 

Extend the inspection period and make them get the water on.

I don't know if you knew this already, but if you live in your house for 2+ years, the capital gains earned over the ownership period is TAX FREE!

Since I've only had this property a short period of time, should I claim depreciation to improve the cash flow after tax or refrain from doing it? 

After my first 5 year interest term was up, I went back to a 15 year period which added about 2-3 years of payments on it but the bi-weekly payment dropped about $150. 

So you couldn’t have an agreement where they required you make the property available a certain period of time or you would be violating the agreement.  

But I would be leery of funding the project on a buy & hold.I guess my question would be if there are many potential partners that would want their money tied up for an extended period of time?

So they will have a good grace period to figure out what they want to do.  

Norris; Pool)— i.owner's intent (nature and purpose for which the property is acquired); ii.The extent of improvements and advertising to increase sales; iii.number, frequency, and substantiality of sales [this generally is the most important factor (SuburbanRealty Company)]; See (c) below iv.duration of ownership; v.continuity of activity related to sales over a period of time; vi.extent and nature of the efforts to sell the property; vii.The extent of subdividing and development to increase sales; viii.use of a business office for the sale of the property; and ix.character and degree of supervision or control over representatives selling the propertyNote: Per court case SUBURBAN REALTY CO. v.

One thing you want to keep in mind is that depending on your lender there will be a seasoning period so it may take some time to get your cash out.