I'm currently going through this with one of my clients.

Feel free to DM me if interested in discussing more, would be happy to assist.

My point here is I don't know how they guarantee a deal but that is an interesting proposition.  

Currently operating and cashflowing, listed for sale What made you interested in investing in this type of deal?

At least run this with good, bad, worst scenarios.

However, some investors don't mind this strategy if they prefer not to put a lot of liquid in up front and plan to refi out within a few years of closing (which seems to be a great option with the talks of the FED reducing interest rates this year).It really comes down to investing in a growing market, in a good neighborhood & building a great team to support you.

Sherman does seem interesting though because of the lower cost and growth potential.  

I'm seeking advise from people who may have been down this road before on whether we should seeking other financing methods to go LLC to LLC or quit claim the lot back to our personal names to satisfy the 1031 exchange rules. 

As long as the city considers your property a true SF, you shouldn't have any issues getting this permitted (in theory, yet to see how some municipalities will handle this law).

My wife and I thought we had an easy opportunity for a double (baseball analogy) with a flip home in Lakeland, TN we were able to get well below market this past summer.