In California there is $800 franchise tax per LLC per year, which discourages a lot of RE investors from getting an LLC.

For tax purposes, you really just need to have everything aligned to the schedule E categories. 

It should cash flow 400/month after taking taxes/HOA into account.

An annual business tax as a hotel of $50 and collection and remittance of transient occupancy tax of 12% from renters is required of all short-term vacation rental operators.

That's 50k a year gone and you are losing tax write-offs and equity potential.

Weigh the long-term benefits of the low mortgage rate you have versus selling and getting $500k from a sale exempt from capital gains tax.

If the purchase is done in cash, as you mentioned, they’d have more flexibility, but they’ll still want to carefully consider the tax and legal implications of the subsequent sales.I hope this helps, and good luck with your client’s deal!

Thats $7700 a year NOT including my accountant/Tax prep. 

Another downside is you loose on the advantages, of the Federal Tax Code, by not closing in the name of a LLC (you can elect to have a LLC taxed, as a S Corporation which is a whole other conversation).If you want to close in the name of a LLC, Mortgage Lenders will offer you Commercial Loan Terms (25-30% down, a 15-25 year amortization, and a ballon due in 5-7 years).

I guess it can save you some time managing, for example one tax bill, one insurance bill.