Also consider that they could get a supplemental loan instead of full refinance, which would mitigate pre-payment penalties.

Does anyone know if CALSTRS supplemental account can be used as cash reserve when refying or buying a property?  

Assuming there is not a similar program to the BC Temporary Rental Supplement Program that you can leverage.Seems like the tenant wishes to ride rent free as long as they can and feels it will have no adverse affects on them once they are evicted in finding further housing.

While I'm not looking to replace my w-2, I would like to supplement it and have my properties there as a backup.

A friend of mine came from China to attend college, looked for a waiter's job in New York City to supplement his income, those that speak better English than him always got picked first.

My wife and I are just starting out investing in local real estate to supplement our income with rental income.

If so, then you could supplement your active investing with passive real estate investing.

The properties you have with the least equity and highest profit/depreciation are the ones you would 1031 using the proceeds from the regular sales to supplement your 1031 purchase. 

—The term “Federally backed mortgageloan” includes any loan (other than temporary financing such as a construction loan) that—(A) is secured by a first or subordinate lien on residential real property (including individualunits of condominiums and cooperatives) designed principally for the occupancy of from 1 to 4families, including any such secured loan, the proceeds of which are used to prepay or pay off anexisting loan secured by the same property; and(B) is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way,by any officer or agency of the Federal Government or under or in connection with a housing orurban development program administered by the Secretary of Housing and Urban Development or ahousing or related program administered by any other such officer or agency, or is purchased orsecuritized by the Federal Home Loan Mortgage Corporation or the Federal National MortgageAssociation.(5) FEDERALLY BACKED MULTIFAMILY MORTGAGE LOAN.

Slowly but surely and bouncing around from jobs, I ended up picking up a security job and studied over night.I attempted several business ideas, a nutritional supplement company, day trading, etc.