So I think you are fine, give them the paperwork documenting your ownership percentage as being below that threshold. 

As Lydia said, see if the numbers work for "Subject To" (purchase is "subject to" the underlying loan), where the loan stays in the name of the current owner, but the deed transfers ownership. 

It isn't ownership in the colloquial sense, but it is investing nonetheless. 

Ownership interest means I have to get that wholesaler to sign off before I can sell my rehab...it could just be because Im a control freak, but there is no way I would do that.

@Mitchell Senkowicz You may want to consult an attorney to make sure you are in the clear and will not be reported to FREC but my understanding is that if you have an ownership interest in the property you can manage it yourself.

I am considering doing so however, would like to buy him outright next year to obtain full ownership of the partnership and property it owns.

The property can be sold and the proceeds would be distributed equitably among the tenants according to their ownership percentage.

I would like to transfer ownership of current house into LLC that will be for our new rental property company. 

I would look for first time home buyer programs many states and counties offer them but you have to be willing to look for them call them and do the research. many require you to take a 4 hour class on home ownership education.

Does the Trustee Deed transfer ownership of the property?