One way to simplify things is by making the management LLC single-member, which avoids the need to file a separate partnership return

I bought it at roughly market value for the long-term debt and strong area fundamentals.At this stage of the amortization schedule, the loan is paying down around $11.5K in principal each year.

I would have just filed a lawsuit against them and took it from there.This situation is quite complex.

You’ve only got about $1,583/mo in principal and interest, so the building makes sense during the rehab/lease-up phase.But once you refinance, your new P&I shoots up to a little over $5,000/mo, and that’s basically the whole issue.

He wants some cash either in lump sum or annuity in the form of interest and principal payments or continuing to receive majority of income.

Some lenders will allow you to pay down the principal balance up to 20% of the original principal balance without triggering the penalty, others will flat out state in the note that ANY prepayment partial or full within the period specified will trigger the penalty. 

It actually cash flows.Plus, since the seller has already been paying for a couple of years, the principal has been paid down $15,000.So, you are “in” for about $15,000 and have all of these great benefits.

The critical deadline is your tax filing deadline, not the calendar year-end.

@Ethan Whaleyi still can't tell if we're saying the same thing here, but principal paydown can definitely be more powerful than appreciation (although ideally you get both.)for example, i have a low rate on my primary residence, and so i'm already - just a couple years in to the loan - paying off large amounts of principal every month. 

You generally don't want to create a multi member LLC because you're generally going to have a requirement to file a partnership (1065) return which means unnecessary filing fees paid to accountants.