I suppose you all are going to say the chances of this happening are minimal, etc.

Fixed operating costs (taxes, insurance, minimal heat) and debt service do persist regardless of the revenue stream; this is why one creates a "vacancy & credit allowance" when budgeting or analysing a property .... it is also why lenders like to see debt coverage ratios (DCR) of 120+%.You are basically asking at what point of missed revenue (vacancy or bad debt) will by boat cease to float.

The property manager fee needs to be paid for with IRA funds - they can take it from the account they maintain, provided they supply a corresponding invoice to justify the expense.Keep in mind, any non-disqualified party can be the property manager - perhaps you have a brother or acquaintance willing to perform these duties who will not charge you a fee, or charge a very minimal fee for their time.

(sometimes 20 and sometimes 80) but on the actual day to day details of my house flipping business it is pretty minimal.

Even if you aren't contractually covered, which I think you are, seller will most likely simply move on and forget about it ... seller has no emd to hold hostage, has only been off market for three days therefore minimal damages.

My fee is minimal, around 1.5 points at closing and lenders is a few points as well but not that bad.

Since he is not "selling" his tax implications are minimal.  

I want to make sure I'm structuring the business effectively for tax purposes.New Wholesale Business:located in GA (LLCs are easy)2 person partnershipassignments and/or double closings only (no flips/holds)I have other business interests so I will be high tax regardless.majority owner of S-corp for IT consultingW2 for my "reasonable salary" plus shareholder distributionsLLCs (and trusts, etc) pass through for owning rentalsLLC pass through for rental property managementLLC pass through for note holdingThis wholesale partnership will be the sole source of income for my partner.My primary concern is whether separate business entities prevent my rentals from becoming "inventory" when the partnership gets treated as a dealer.It seems a basic S-corp is the way to go with regard to earned income to minimize SE tax.  

Since 2007 I've been trying to come up with my own funds to start this industry, but between the recession and loosing employment I haven't been able to.I've found several properties for sale in my own area where renovations are minimal and profits could be between $15k and $40k low and high $80k.

Ease of maintenance is why I like townhouses that are fee simple with minimal HOAs.