My tenant has accrued a large sewer bill that I will have to pay if she does not.

I know there is a law that it goes back to bid after auction so there is some waiting gameTo answer your question after you receive the deed you can have a title company call the lender for the payoff whether you pay off note or wait for sale depends on if the first has filed foreclosure or where they are and can you sell it before then, but recognize late fees and interest continue to accrue which if they get legal involved adds up quicklyI always want yo buy the first that way you have control

Purchasing another property with the equity accrued is, of course, a great way to build a real estate portfolio.

Include a provision that if she fails to vacate, the two weeks of rent is due in full and rent continues to accrue until she vacates.

My point is seller does not want to accrue legal fees any more than the OP.  

Yes if they foreclose and it sells for $250k and they are owed $280k, you get wiped out.Note: just because the Unpaid balance of the loan is $280 the balance could be significantly higher due to accrued interest, late payments, lender advances...

I am trying to get a start up off the ground and simply want to be more liquid so that's the motivation.My plan is to check in with the GPs first and see if there is any interest in purchasing at a discount or if I forgo any accrued distributions.

Generally you take deductions in the period they were PAID not accrued, so if you paid 2018 in Jan. 2019, that would be an Itemized Deduction, the 2019 taxes paid in December 2019, deduct that in full on Schedule E.I am not currently including them.

Wouldn't the seller be pissed at this point since you are not paying the full 5 years they would not accrue all the interest and actually net the number they had expected?

(Again, having verified from the municipality that they will negotiate)I did that with a 10 unit apartment complex here in central FL where I got the seller to sell me the property for 25k subject to over 300k code lien that was accruing at $300 per day.