Also will IRS give him/ me tax free profit at the sale or how would that work?

I did not, I found the deal and did the work in exchange for 50% of profit.

The main problem I need to solve is to convert it back to a legal single family house so an end buyer can get conventional financing on it.Up and above that Its up to my discretion on the level of finish.Or I could take the easy profit and sell now...

On the other hand, we would start to lose our $500,000 exemption (we are currently at about $422,000 in profit using the redfin estimate).

Mindful of the fact that I'd like a way to generate income to reinvest and grow and I don't know anything about buying and selling REO, notes, tax-liens, and all the other seemingly 'quick-turn profit niches out there , is Multi-Family smart to start with?

Best wishes for a profitable future.

As some of you know, I closed one last Jan 2018 for 25% profit.

It may be profitable to build and rent versus buy and deal with rehabbing. 

Our motive with them is not profit but the income on lot rent and equity gains on occupancy gains ( though not gained a sale or refi  - at this point to early to see if we would want to refi ) 

I am not an expert in wholesaling but I know there are a couple of different ways to go about it and a couple ways to profit.