I am trying to determine now whether I back out of this deal or think about the long-term potential. 

That determination can only be made by an licensed adjuster for the Insurance company.  

That way I get to determine how it's used, not the bank.

This is the statute about determining the value of permanent improvements:Section 6-5-254Payment of value of permanent improvements; how value of improvements ascertained.

The properties are not available to see prior to the auction,  how are you determine that is manageable?

Near the end of the useful life, there is less value to accelerate, decreasing the benefits of a cost seg.Properties with small purchase price:Cost segregation companies should provide you with a quote so that you can determine if the benefits outweigh the cost.

Quote from @Nithin Thampi: It's important to understand how to analyze a property to determine what will provide a good return on your investment.

Like Ben mentioned, there are different factors to determine who in this scenario would have capital gain, and the amount if there's depreciation, and if any qualify for the primary residence exclusion. 

I'm too busy to baby sit my 4k leads going out each month to determine if my SMSs are no longer going through?   

I was determined to build my real estate business a lot quicker, with a lot more sustainability, and a lot less commitment to the tedious work most thought was required.So, here’s what I decided to do.