As the Company is working to cure title in a reasonablydiligent manner, the Company would not be liable for any loss to the Claimant.

I want to know if it is possible to use this home loan for STR’s since I know STR’s (Under Tax Code Section 469) is one of the routes any RE investor can take to reach “Real Estate Professional Status,” and so use passive losses from my property to offset active, earned income (My W-2 Job in the future). 

As far as the reporting goes, the rental income and losses will most likely be reported on your Schedule E - speak with a tax professional who has expertise in real estate.

You can also take a loss on the old asset. 

If it was me, and I found another opportunity, I would cut my losses, especially if you can't fix the physical issues.

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When analyzing deals its always seems as if the opportunity is passing me by and the rational part of my brain turns off but posts like yours are sobering and will help prevent mitigate losses.  

They will work with the buyer to re-set the loan and terms because when they foreclose and bid the property in for their loan amount which they mostly do around here, they have to recognize the loss as a non performing loan which has a multiplier effect on their lending base.

Bring a can of white spray paint with you if you feel the need to touch it up though unless you have exactly the same shade, it will leave marks.Evaluate each request on its own merit and decide if it needs to be done or if it can wait.

When your rental produces a loss in excess of income (AGI) you have a passive loss.