At the end of the day, I can tell you from experience that it is very common to purchase property using an LLC formed in a different state than where the property is located.I recommend you connect with a lawyer in a state in which you plan to purchase property and/or in the state you intend to form the LLC.Good luck!

(Roof, windows, doors, HVAC)- large fenced in backyard - 2 car driveway in a location where driveway is not common- Overall, interior is up to date and property is in a good condition and area.How would one should approach this to make it work for both parties?

Some have HOA common water service, built into HOA dues. 

Is a prepayment penalty common on a mortgage?

A very common project management fee would be 20% and this will a lot depend on the scope of the project and the net returns.

For example, doors should be inspected on both sides, the spine (most common area to split from being kicked in) and the frame.

@Nickolas Burns everything you described is common in properties of this age in Sioux Falls.

Either or works Well just use this as a simple example 24 Unit apartment Complex ( B-  or C +  type  property Purchase Price - 1,920,000 ( $80k Per Unit ) may be low in this market Down payment - 25% = $480,000 Rehab - $ 6,500 per Unit ( some units  more than others ) = $ 156,000Common Rehab - Water Heater , laundry room if it has one , Paint of building , landscaping , windows , parking lot  , roof ( 10k - 70k ) This ranges a lot depending on the property Closing cost - 20-30k tax - 7,000 / year insurance - 12,000 ( wind n hail , general , fire  ) / per year Property Management ( 10 % ) = 2,160 / per month vacancy - 10 % = $ 2,160 per month Cap X ( fridge , window , curtains , doors , paint , roof , pavement ) - 1,080 / per month Landscaping - $ 800 per month simple repairs - $ 500 -900 per month common area electric - $ 300 per month Mortgage $ 7,500 ( 30 year amortization  , 4.75 % rate  ) Income - $900 per unit = $21,600 , this varies based on area . 

That gain will likely push into the highest tax bracket and a large increase there and/or less favorable capital gains treatment could be a big stinger.5.

Those are simple 2 common ones.