@Jon D. some questions, the answers may help you better focus.1) Why did you pay your primary mortgage off in the first place?

Less licensees paying into the pot means everyone's costs go up.

Now, you need to figure out how to find deals and pay for them.

You have to put more money down and pay a higher interest rate and is limited to only 2% IPC.

After all, you have no evidence they agreed to pay rent or any of the other terms.

I can pay some va's 400 to make 1,000 callls per week.

Hope is a bad strategy.The only on market strategy that I think can work is paying cash/line of credit/hard money for a property that does not qualify for conventional financing.

Well that is when the lower tenant feels like paying her 20% portion of the rent of $240 per month lol!

So all of the gain and depreciation recapture are initially still tax deferred.However, like Joe said, the down side is later when sold  you lose the 1031 option. the client will pay tax on all gain and depreciation recaptured from before the 1031 also. 

I noticed that the previous owner let them pay half the security deposit and the other half later, which is a red flag.