You can get a solid new construction property for under 200k and you can get a great, lightly cosmetically renovated, with newer major mechanicals, cash flowing rental for 80k.

If the intent of the rule is to prevent transactions like this it seems like it would be easy to structure around either using some mechanism like this or by using something other than an LLC?  

I've been looking up 'Liens' and I'm not sure if my situation would qualify for a 'Mechanical Lien' or not, or if there's some other step I can take to secure my $40k.  

You haven't mentioned big items such as mechanicals (furnace, water heater, A/C), roof, electrical, plumbing, siding, structural, and other potential big ticket items.  

Always include a push-pull buy-sell in the Agreement or some other mechanism for ending the relationship between the members.  50/50 sounds great and fair, but really doesn't work well.  

Did a walkthrough of the home and it looks sound, but I really need a focus on the mechanicals and structural issues.Thanks,Gene

Same with rood, mechanical, etc.Rule of thumb: The inspector is a generalist.

This has a mechanical key, which is nice, just in case the battery dies.https://www.amazon.com/dp/B00T...

But if they read it that is a good screening mechanism.

Personally, I wouldn't buy in a flood zone if the mechanical and electrical systems are in the cellar.