Spanaway went through a tough time a while back so I don't know if it has recovered and coming back or not.

So make sure your numbers are good in that area.It could still become a profitable rental by not taking out ALL the equity. ie, buy some cash flow.The BRRRR method is likely less doable now since property prices have recovered from the crash discount bargain basement prices they were at for several years.

But its not clear that they'd recover any monies.The way people generally get around this is to set up a trust after the sale closes.

Question is  "can landlord recover damages and lost rents, utilities and advertising in addition to security forfeiture, or must security deposit be used first for lost rents and damages?"

If there is a crash or rents fall worse case scenario I just cash flow less for awhile until the market recovers. 

If the stocks drop just keep it long term and it should eventually recover (it always does) and you still have the other 50k sitting in CDs for your real estate when you want it. 

Also, I suspect that going to battle over keeping them in the lease would just cost more in legal fees than it would recover and would not improve the situation.Would appreciate any suggestions on minimizing/eliminating breaking of lease in the future.

2) Am I stuck with the structure for 3 years even though it was not suppose to be there 3) what expenses can I recover if an heir redeems?

Ultimately, whether or not you decide to take them to small claims court will depend on many factors that only you can evaluate, such as how much money is owed, whether or not it's worth your time to try and recover that money, the likelihood of being able to collect on a judgment if you are successful in court, etc.Good luck.

What it entails is calculating that 1) your property will continue to cash flow positive during the recession 2) ensuring you're buying in an area that will not drastically impact your house purchase price (in other words, the price drop will be insignificant enough and will recover quickly in a few years).