Before this occurred, one of the tenants alerted the current property manager/sellers broker about a leak from the apartment above them.

Repayment of the invested capital is part of the waterfall, but it can occur at different points in time depending on how the waterfall is written.So bearing that in mind your #1 & 2 are conceptually correct at a high level although there can be subtle differences that can have a material impact on the actual numbers.As to a lookback, if the waterfall is calculated properly the lookback is a continuous calculation so it wouldn't be possible to over-distribute to the GP.  

Stat. 25-3-309(a) states, "A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.Keep this in mind when looking to buy notes with collateral in North Carolina!

I thought non qualified use could only occur if the property was used as a rental BEFORE you occupied the house as a primary residence but it didn't apply if you lived in it first then rented it out then moved back in.https://www.biggerpockets.com/forums/104/topics/43...But according to Nolo non qualifying use only applies if the home was rented out BEFORE it was used as a primary residence....https://www.nolo.com/legal-encyclopedia/taxes-when...However, a special rule enacted in 2009 limits the $250,000/$500,000 exclusion for homeowners who initially use their home for purposes other than their principal residence, such as a rental or vacation home.

This practice cuts down & or eliminates most, if not all confusion & or miscommunications that can occur between the tenants & landlord in regards to the exact condition the tenant can expect the property to be in on move in day.

Plus when their pay is based off a salary, and not the traditional profit making methods, their only motivation is to bring costs down as a whole and not worried about making money on change orders when they do occur.  

I can testify that the damage occurred within the last few months because I do a couple walkthroughs a year and it never had this damage from before.

Instant booking occurs when the guest who has prior positive Airbnb bookings can confirm a booking without sending a request.   

This implies you and your family are taking on all the liability and your friend can walk away if something catastrophic occurs. 

@Russ TrimboliI agree with the earlier comments that you would have to get a valuation if the conversion occurred after you purchased the property with pre-tax 401k funds.