If the partners agree to specially allocate one item (for example, capital gains) 80/20 for economic purposes per SEE safe harbor, the corresponding tax amounts must also be allocated 80/20.However, IRS has a framework that can reallocate the partnership items based on the “ partner's interest in the partnership” if IRS determines the method of sharing the partnership items lacks the “Substantial Economic effect” (SEE) To meet the SEE, there are strict rules to maintain meaningful capital accounts including Deficit Makeup Requirement for those accounts.With the requirement, the partner must at some point contribute sufficient capital to eliminate the deficit, and the partner has the burden of the loss that partnership has and the allocation of the partnership will be respected by the IRS.This is a very high-level summary of the rules and is not comprehensive. there are many exceptions as well.Since the substantial economic effect, safe harbor allocation rules are complex and requires considerable additional recordkeeping, it's easier to follow PIP standard. 

The house also had an addition added on in the 1820's.

Also from what I understand the building department is backed up unless you hire an expediter, so another 6 months for plans and permits or additional 3k I believe

I have about $20,000 liquid that I can tap into from savings, which I would use a portion for the down payment, and my credit score is 710-714 so I'm not opposed to obtaining financing through a local bank or credit union for financing.Also, what additional books, materials, or resources would you recommend that I could read to get myself more familiarized with this form of real estate investing?

For folks who want returns in the present, out of state purchases that are managed by a quality property manager are worth their weight in gold. 

Write up a rental agreement addendum -- month to month at first with monthly property inspections, an additional $100 bucks a month rent until deposit is paid. 

Additional concerns: tax implications, risks, benefits, & any additional information especially involving paying the least amount taxes. 

The 1031 does let you use it.But there's an additional component that is also at the core of a 1031 investor's strategy - leverage. 

The unit I am living in is a 1 BR/1 BA on the second floor of the building...the door to the attic is right outside my entrance and goes up to a big open area that USED to be 2 additional bedrooms, however, it has been vacant for years as there was a fire in the 80's.My handyman took a look and agreed that he could definitely add the 2 bedrooms, no problems...I know egress windows will be a major factor and I am also looking into the heating and electric to make sure it is linked to my unit's heater/panel.What else should I be looking/planning for?

My thinking is the extra money each year could be a down payment on an additional property or extra more for a value add property.