I figured this is a great opportunity to alert others in the Nashville REI community, as well as get some feedback as to what one might do in this kind of situation.

Basically wondering how others in similar situations (seeking conventional financing) have structured partnerships with a close friend.

Very specific situation I've got here that I haven't been able to find good information online that fits this unique criteria.I have a friend that has a property that they own free and clear of mortgage, yet they are paying a HELOC of approx. $300 a month for.

@Jake Keating I’d suggest consulting with a local tax and/or estate planning professional for advice on this issue to make sure you get the best advice for your specific situation. 

These guys might be ready to downsize or move into a living situation with assistance.

I plan on renting out the home for several years and hoping that the IRS liens will drop off before I ever consider a sale.Does anyone here have experience in dealing with a situation like this?

(Don’t fight the hypothetical, that’s the situation)In trying to finance the flip, which will cost between $40-$50k, the only way I can think to finance it is a HELOC.  

They have something going on in their lives that is motivating them to unload the property as fast and with as little stress as possible.I'll give you an example of a seller I worked with that you can share with your wife to help her understand the kind of situations we regularly come across.This guy had his house up for sale by owner because no agent could help him.

It became clear she wanted to milk the situation whether she had any legal standing or not.Day 3: Send written notice of change of ownership and officially serve 60 day notice to vacate.

We once had to wait 4 months to close bc of a probate situation, due to notice of creditors that wasn't filed.