It should have been removed and the terms adjusted as necessary.  

You have to adjust your methods to it or just pass on every deal.

If you also factor in that most people judge their own capabilities vastly beyond their actual performance, then the better risk-adjusted choice would still be to fund your retirement account. 

-When I sell the property, would I be paying a tax on the profit of the sale (sale price less adjusted basis) AND a LLC fee based on the sale price?

I will adjust those.

The property must be owned in your name and not in a business entity (ie LLC).Portfolio loan: higher adjustable rate with less favorable terms (ie 5 or 10 years and includes a balloon payment).

Ask a business owner if they would take a 30 year fixed at 4.75% with no balloon and no adjustment. 

I expect a year from now their cash flow will each be higher than it is today.  5 years from now I expect the RE with below $200/unit cash flow to be above $400/unit cash flow.A $200/unit month cash flow with no appreciation will have a $163/unit inflation adjusted cash flow 10 years from now (used 2% inflation rate). 

In CA the taxable rate is assessed at time of sale, and that tax basis is used to determine the taxes until the property is either sold or has permitted improvements (there is an inflation-adjusted increase allowed, but the starting # is the FMV at time of sale).

If I come along and I plan to self manage, and we have identical cost assumptions and identical performance requirements, I will likely have a lower offer price and get the property.