Small stuff, like duplexes, 4-plexes, even 20-unit type of stuff is still viable for wealth building over the long term if you can find long-term financing such as local bank debt, and you are in a decent rental market.If you define it as large multifamily, such as 100-unit and up apartment complexes, it gets more complicated. 

This direct method might work in small or informal arrangements, particularly with buyers you know and trust, but it increases the chance of legal and financial complications over time.Establishing an escrow account as part of the transaction is also strongly recommended.

It's still not "on income physically received" because the formula is more complex than that, but it's stretched over 5 years.Your situation is complicated by two factors:a. we do not know if this is a one-time deal or your regular business modelb. the fact that you are subdividing a larger lot can throw a wrench into your preferred tax treatmentSo really it requires a one-on-one discussion with a real estate tax expert.

Quote from @Nick Liao: Hi, Sean, I would greatly appreciate it if you could send me one copy too.Sure, I just sent you the sample material participation activity tracker / REPS Log that follows the guidance suggested in IRS Audit Techniques Guide (ATG) 

Quote from @Savannah Wallace: Hi Rodrigo, If the property is still in your name, collecting rent directly through the LLC without a formal agreement could create complications.

I've partnered with several contractors over the years (before I got my own license) and it is very normal for the contractor to be paid for materials and labor, even if they are doing the build "at cost"It's complicated and as other have stated, you've gotten yourself in too big of a mess to be sorted out by some people on an internet forum. 

While I don’t know their program or them, I’ve yet to see a mentorship program that cuts the time necessary to obtain the knowledge required; that has a monopoly on any tactic, strategy or technique that’s not common knowledge; and or that provides any ongoing “help” that’s anything but “basic”.If you’re not well versed in principles, finance, and law, either read books on these, attend college classes, or take a course(s) leading to real estate broker (salesman) licensure.  

In order for something for something to be respected by the IRS as a "cost segregation" study, a qualified engineer needs to come out to the property and do a site visit (see the IRS Audit Techniques Guide).  

Sorry, I'm an attorney, it's pretty much my job to make things more complicated. 

This is a complicated topic.