Having a vehicle that drips oil on my driveway is good enough reason, having insufficient credit is the easiest saying without compensating factors.

A couple friends and I are looking at co-buying a residential (non-investment) property in California and we're attempting to engineer a vehicle that would allow us to receive the best mortgage terms possible (a la avoiding a commercial loan), preserve the section 121 capital gains exclusion while also realizing the benefits and protections that come with an LLC.Is it possible to have each owner, that's planning to occupy the property as a primary or secondary residence, establish a single member LLC in a way that gives us the best lending terms while maintaining the flexibility to have individuals sell their ownership interest (via the SMLLC) to someone else without triggering due on sale?

You also need to know what is the required parking per unit, required set backs, are curb/gutter/sidewalks required and if so, what is the width, etc, what is requuired for driveways, do you need enough for a turnaround for emergency vehicles, how much in the way of landscaping areas, are there any easements that affect the property, and any other local building regulations that affect the density allowed.

Just my opinion, so please take this with a grain of salt:  I'm not a fan at all of 401k's and real estate is my far preferred vehicle.

Also the house is movable to when I am rehabbing a property I can park in the yard and keep an eye on the project ;) How did you find this deal and how did you negotiate it?

The law says it has to be your "primary place of return" as proven by your driver's license and at least one other form of documentation (voter registration, vehicle registration, etc.).

Right now the S-Corp is the new tax saving vehicle. 

Tom,Outside of being an issuer (finding your own deals, managing them to disposition) which enables you a lot of exemptions from being licensed, the only two options left are starting your own Fund (Special Purpose Vehicle - SPV) or getting licensed and having your company affiliate with a licensed broker dealer. 

In this scenario you would then have one of your companies as an active income vehicle, charging your passive income vehicle (the real estate company) for the management service.

That's a $25,000 increase on your initial investment, giving you a 25% return rather than just 5% which you’d be hard pressed to get with any other investment vehicle.