I'm having a very hard time with them and on the verge of losing my earnest money on a house purchased to flip.

To them the LP it's often fun money.

Our attorney told me just return the money as the brain damage of going to court and potentially losing (court is really just rolling the dice - small claims court is not about justice and the law but what the "judge" thinks is "fair") is not worth the possible gain.We always sign a lease and any funds paid are first applied to rent and the SD is collected last.

We let them invest in these homes with us by allowing them to buy a % when they collect/earn enough money.

i know that's not what anyone wants to hear right now, but the huge rise in home equity over the last 5 years has made equity seem like it's free money and it's absolutely not, in fact it's extremely expensive.  

hard money lender?

About 90% of our tenants pay online through our portal and the other 10% pay cash, check, or money order.

Since prices are so cheap, you don't need to worry about hard money.

If you have a self directed account and invest pre-tax money into illiquid assets like syndication or mortgage notes they will come in at a value of less than the principal.

I enjoy the challenges of earning money.