Place them in the units that need the least amount of work.2.

I am sure you guys are filing married filing jointly now, so even after LLC, you would file the same.LLC just acts as the bridge, the amount of income from rental or tutoring will have same effect with or without LLC. 

Admittedly I operate in the public eye a lot more than your typical landlord or real estate investor so I'll receive a higher amount of this type of stuff then most but most if not all landlords or investors are going to face this type of stuff everyday.

Again, this number may not seem like much but I don’t think it looks that bad: this investment basically gives me the opportunity to put to work an amount at an annualized rate of 9% for 30 years.

The amount due for a loan before you get one is called a loan origination fee and that is usually  done by someone with a license (which you do not have) this is so the lender knows that the paperwork is done correctly. 

Also if the building needs repair or is already rented will factor into the loan amount, terms and interest rate.

BUT when you are just getting starting, it may be hard to get only listings or any substantial amount of listings until you get a solid referral base.

It'd take you decades to recoup that amount in the form of rent.

Unlikely it will sell at the auction, unless someone bids the full amount owed including of course all accumulated interest.  

The remaining amount of money that I have; that my friend gives me is going to be back up money.