At least a third of my investments are in defaults and I don’t expect to recover any principal balance lost.

The location may take years to recover, or it may never recover.

What other ways could have have gotten to a positive cashflow solution sooner than waiting for the market to recover?

When busting up concrete in a basement to lay plumbing pipes underground, would it make sense to NOT cover those pipes up with concrete, but instead use something like this? And then use a plastic easy to remove cover...

Rehab all the units, increase rents substantially, and cash out refi to recover as much of the money we have in the deal as possible, as quickly as possible. 

Just 2 years later the unabated growth was no longer a problem and people were talking about if the city could ever recover (spoiler, it could).Austin will correct just like every other real estate market since the dawn of time. 

Bottom line is you need to recover your negative CF ASAP, or you're going to be paying your for your tenants to live in your house.

My concern is that since they only have a $1025 security deposit, I would be able to recover only part of my costs.

Historically it has been boom bust, but I am not sure it will ever fully recover from the last bust. 

Second, the cash flow you get should be enough to quickly (see:  third) recover your down payment ...and then start profiting from the CF.