The IRS will treat the LLC as a partnership for tax purposes, so you will need an accountant to provide you with K-1 statements at the end of the year. 

Because I have chosen tenants who are COLLECTIBLE and who pay their bills on time, I have found out over the years that if you treat rent as a bill, the tenants will pay on time.

But 2-4 units are often treated very similar to single family homes.

Depending on the extent of the termite damage and whether or not it was treated (it should have been since the owner disclosed knowing about it but clearly did not keep up with maintenance), we estimate it will take $5k - $10k just to have the major issues fixed and safety hazards resolved, let alone actually improving the property to make it more desirable or able to bring in higher rents.I am going to submit a list of repairs and try to get the seller to at least pay for the major repairs and the issues breaking code.

Having done hundreds of BPOs over the years, I can tell you that a lot of deals die here either because the real estate agent/investor treat the BPO as an inconvenience or something that they can manipulate at will or because of politics on the lender/AMC side. 

You can treat this as a business, and should, but I wouldn't be in a rush to transfer anything over to an LLC.

How is this treated in a Section 1031 exchange?

How is this treated in a Section 1031 exchange?

The point there is the method of marketing weighted heavily into the viewpoint of treating those like securities.  

If not paid in full before that time, the outstanding amount will be treated as a distribution.