My understanding is that you do not need to do a separate tax return for each LLC, assuming they are single member LLCs then I believe the IRS disregards the entity / the income and deductions just flow through to your tax return.

What do you think would be a standard, fair agreement to offer them?

Since he is the front line manager, he is responsible of maintaining the homes to standard.

That was helpful but I believe I need to report the remodeling costs now not when I sell as advised by Matt.We have a continuing discussion about this and I believe the rules for 2014 changed as well, so you really need to seek proper advice.However, the discussion we've had goes along the lines of whether we made a repair or replaced something, as to whether we can take the deduction.

Should I deduct the $7000 out of the sellers money to cover the taxes owed?

Tight lending standards for builders?

You get positive passive income, depreciation deduction for tax purposes, and hopefully some appreciation going forward. 

The only reason "flips" in 2015 are becoming rentals is to convert them to long-term capital gains... these so-called rentals would still be purchased using standard "flip" criteria.

I have a lot of itemized deductions so I don't want to start all over this year with my CPA.  

Obviously some investors will be more comfortable with that than others, and it's really up to the platforms to keep those standards high if they want to remain long-term players.