With regular fees quarterly, yearly, and continuing education course to keep your license and REALTOR status.

@Samir Shahani I guess I would look at it though this analogy, when you are looking for dollars on the ground, don't pass up the quarters.  

These taxes a applicable to an IRA when it engages in a trade or business on a regular or repeated basis, or uses debt financing such as a mortgage to acquire property, respectively.As a lender on a note collecting interest, neither situation should apply.See IRS Publication 598 for more details on UBIT & UDFI taxation.

How does that affect taxation of the capital gains?

Agree with @John Thedford, most residential properties will be undervalued anyway with a steady market, since the assessments are based on a value of comparable sales a year old  before they are applied. 2017 values which come out now are from the last quarter sales of 2016.  

After balloon payment, they will pay quarterly dividends averaging 20% per annum (up to $100K for a $100K investment, or for life with $300K+).

What would be the effect on either of us as far as UDFI taxation goes?

I wonder how many LL's have been charged to "replace" a garbage disposal when the issue was just a quarter-turn with that handy dandy allen wrench?

Also, a friend of mine (who came over and was going to give me a quote for installing some quarter rounds) and I noticed that throughout the living room and bedrooms there's some water/moisture around the baseboards.

It will most likely be one of these but your business type, goals, risks, taxation, etc all play into what structured entity is best.