They also claim it has 6 beds and 5 baths.

If I rent it out and the rent monthly payment let's say covers the mortgage and HOA, the cash on cash return will be $40K(appreciation)/($ 42K (Down payment) = 95% and it will be 1.95 to find the cubit root and it is about 25% yearly return on my initial investment. 

It's all about risk in the event of a lawsuit, which can also usually be covered by insurance.- If you decide to have an LLC for each property, creating a Management LLC that all the other LLCs "hire" to run their books, will allow you to only require a bank accont for the Management LLC.2) You may not be able to do a Trust.

The new design takes the home from a 3 bed, 2 bath to a 4 bed, 3 bath, 2,400 sq ft rambler on a large lot in highly desired area.

It's just an unfortunate side of house flipping when you're first starting out - you typically don't have your downside covered.  

Sorry if this has been covered before, we are located in Minnesota if that matters.   

It may well form part of the bank valuation in terms of square foot, and it may be covered in the habitation license (the habitation license would cover house + annex), but it will be treated differently and need to be closed off for rental.

Taylor sent multiple email inquiries to our insurance provider asking what risks their policy covered.

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

I am still obligated on the interest payment regardless of how much has been deployed but that is worked into the fund proforma and can be covered by deal cashflow.As to resale price, one of the last one's I did I sold for $125K and had a private loan for $85K which I wrapped.