Regarding taxes, I believe LLCs are pass-through entities, and you will just claim the income on your personal tax returns.

No "headaches" except for risk of near total loss of principle unless I put more money in...I'll take the risk of a project that I need to complete personally in exchange for a near-perfect risk/reward profile and complete understanding of the investment.

As of right now me, my partner , and one other person is moving in but, I need to find a way to fill in the other 2 bedrooms.

Hard for a person to imagine living there. 

Keeping your building expenses separate from your personal finances can make it a lot easier. 

BP has lease templates for every state which are good, I personally use one from eforms.

It sounds like you are placing into service as a rental a house that was previously a personal residence.Your basis is purchase price + improvements made to the house from purchase to the time it was converted into a rental.

Hi Zak-Great question.It sounds like your credit union is offering you a Home Equity Line of Credit as they do not expect principal payments and your primary bank is offering you a Home Equity Loan.Personally, I don't like having to pay on an equity loan unless I use some of it and only pay on the part I use.Although, this is a personal decision for you.If you make investments that provide enough cashflow to pay the principal and interest to your primary bank on the equity loan it doesn't really matter to you as others are paying it.Another consideration is the amount of dry powder available to invest.

You are bidding based on still owing that amount. depending on the state you need to know what is superior and inferior. think about it this way, you are marrying a person with kids from a prior relationship - those kids do not go away, you are taking them as well.2.

This person is to diplomatic, think someone took over his account.