First, if the auction price is higher than the amount of the 2011 lien, Jane can apply to the Sheriff for the "excess funds" up to the amount of her outstanding lien. 

So Dave's great theory should be called The Affiliate-IRS Method because it assures you loose the most capital possible to taxation, capital that via a mortgage is less and put's more capital in your hands to utilize and deploy. - Half of REI is about appreciation over time.

In fact he gave me credit for income derived through the LLC including all add backs in excess of my actual cash flow distribution. 

And were so Tapped financially  we had no choice but to put it on a back burner, move into my inlaws basement, and loose our stability, security, and stash.

Some still are careful to leave meat on the bone, but a lot are getting really greedy and play loose with their statements regarding ARV and Estimated Rehab Budgets.

For most they just loose the profit potential, it's the LP's who are generally holding all the $ risk.     

This material has 0 tolerance for humidity of any type, and will explode like a sponge if it gets wet a couple times.I have seen situations where homes are closed up all summer due to foreclosure and large portions of the floor start to swell and buckle just from excess humidity and no A/C.

New Jersey as another example has very loose usury laws and several states usury laws are very vague leaving some to interpretation which can also get you in trouble.

In addition to the response above, any excess losses incurred can be used to offset other similar types of passive income. 

. - I hear your concern about a potential excess of new housing;  I used to share it as well.