So it functions as a 2 bedroom in their case and they use the railroaded room as an office area.

agree to let them out of the lease, no strings attachedYou can do this in a calm and professional way.....this is business, not personal.Landlords cant function out of fear that a tenant will intentionally damage the unit.... that is a risk, but you cant be held hostage by that fear.Professionally state that the tenant signed the lease with the unti "as is".....and if they feel its uninhabitable, you will gladly let them out of the lease, no strings attached and the deposit will be refunded in full if the unit is returned in move in conditionDO NOT GIVE INTO THIS DEMAND....you will regret it

All deals are a partnership.

Hence the need to protect your assets from law suits which is the function of the umbrella,a coverage.  

Hello All, We are working on setting up a new LLC/Partnership for buy-n-hold rental investing that will have two members.

So you might end up waiting a while to deploy your funds when you could have already been in the game.Def not a fan of partnering on small stuff though- not enough money in it to warrant the effort and hurdles of a partnership.

@Ellie Perlman A partnership sounds like a good idea.

What are your goals in a flip partnership (besides profit :)

We filed a separate partnership return for the LLC.

For the most part, "partnerships" in small time real estate deals are dumb.