I am essentially the owner even though title has not been transferred so I have full owner rights, not just tenant rights as with a lease option...    

Before I can go back to my friend and ask him to transfer his money to my account. 

You can read about other ways people suggest getting around this (i.e. buy in the name of a LLC and then just sell/transfer the LLC), but those are more complicated strategies. 

When my husband was transferred (military) we rented it out.

Also, unless you can get a buyer to pay cash or conventional loan, you're going to have to wait 90 days after the title transfers before the new buyer can get and FHA loan.

Thanks @ Brian Eastman I think what I have learned from what you say is that I do not have to look at the transfer as long term or stuck to only a single investment category.  

They will then issue you a 1099 at year end to report the rental income that they have transferred to you.It's funny because you only need to utilize this reporting method when YOU are providing services to THEM.

Originally posted by @Cameron Skinner:no it means if you buy a home that is your primary residence for 100k and sell in a year for 200k you will owe tax on 50k 50% of you 100k profit because you lived in it half the time needed for a full exclusion, if you live in it 18 months you would owe tax on 25k of the profit The maximum exclusion is for really high priced homes for example If you buy a home that is your primary residence for 1,000,000 and sell for 1,750,000 in 2 years you woul owe tax on 250,000.  750,000 profit on sale less up to 500k exclusion for married filing joint Incorrect. that is only for certain limited circumstances such as job transfer, loss of job, etc.

If vacancy is the issue couldn't a buyer(s) be prescreened to allow the smooth transfer between the current owner and a new tenant?

If not you may have to go into the tax assessor and show them your documentation and have them transfer the name on the property to you.