Depending on your loan type you may have issues when the appraiser reports 5 functioning units in what is only supposed to be a 3-unit building.

They function.

That is an important step-wise distinction in how the contracts would actually have to function.  

If I understand your question correctly, the first thing to determine is does he want to function as a bank or as some form of equity partner?

I'm new to BP and REI in general, but I've noticed several posts mentioning class B and D areas, etc. How are these measured?

So you cant exactly buy a cheap distressed house that you can add allot of value to, but nothing stoping you from buying an ugly house that is functional but simply never been updated.

I suggest that you pursue Quickbooks Plus; the Plus product comes with Class Tracking which makes this classification process that you previously did on Excel much less tedious and will unlock a lot of useful metrics as you pick up more properties.

I guess I just don't really understand what it means and what it's function or reason for doing so is.

I just want to make sure it functions before I start transitioning everything over to it.

We do have one program that we call a calculator; it's a toolkit of simple functions like loan amortization schedule, income multiplier, six functions of $1, etc.