I have a lot of broad knowledge, but sadly I didn't pay as much attention when it came to taxes that could possibly help now with real estate business.

I foresee it becoming a hotbed for medical professionals and chapel hill residents migrating there for the tax benefits and roi on selling their chapel hill homes and moving there....

These may sell for no more than back taxes.  

I work with a commercial lender that loans based on the property, not your income (no tax returns or W2's). 

They don't seem 100% sure of this but say that it would be easier as I would have a federal Tax ID with an LLC.  

How should we go about doing this and how should we record rental income for the first year and record taxes?

However, you may need to discuss this scenario with a tax accountant to determine any tax advantage you may get using a land trust in this arrangement. 

Ok Stephen heres the deal i have to do the repairs and the payments are 1500 a month right now there are 2 apartment rented the first floor has to be done over complete to make it an apartment the two rents equal the 1500 the new apartment would bring in 1300 a month taxes are 5500 water an sewer are 1050 ins 2400 snow removal 500a year put  away 500a ayear for repairs the 1500 goes towards the principle theres no interest and the balloon payment in 5 years

I looked up the tax records and it's actually held by an investment LLC out in Cali.

I looked at the tax info on the property and found the address of the owner(they live out of state).