Is it common to give experienced developers such a premium for their sweat equity?

Also we are thinking to add additional floor space in the roof, if the structure allows for it. 

Don't get caught in the trap of not wanting to hurt your cash flow, when that equity could be better utilized to generate more cash flow in a safely leveraged additional investment with all the other associated benefits of owning more property(loan pay down, depreciation, chance for appreciation, etc.).

Usually the next hurdle is off street parking, around here 2 off street parking per unit is common though some places are requiring 2.5 or 3 per unit.Next is code issues including fire separation;  the 2 units need to be separated with a fire barrier, usually they will accept 5/8 or 3/4 inch drywall; or double layer of 1/2 drywall. 

East Bay- it is common to leave vacant 2-3 months these days. 

As well as I have a cosigner who would be willing to sign the note (although he doesn't make a lot he has an additional $2M worth of real estate).So here are my questions:1) I know there are some legal issues with trying to raise money from private individuals for real estate purposes and I don't want to do something that might end me up in trouble with the law.

No down is often promoted but those deals are not common.

So unless the LP is willing to go with him as a tenant in common ownership position in the new property that won't work.2.

In addition to ensuring there are no legal issues clouding your ownership, that will also give you six additional months to clean up your credit score and also to establish some work history.

I suppose you have been reporting the rental income and expenses(including depreciation) on your tax return.If you get paid in Italian currency - it is your job to convert the amounts in USD when reporting it on your return.If you hold the property in an entity(partnership or corporation) you may have additional informational forms to file with the IRS.If you have a bank account in Italy with a value over $10,000 - you also have an additional informational forms to file with the IRS.You should have been entitled to a step-up in basis upon inheritance.