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

So if the LP's have enough cash they simply pay the loan off and own it free and clear.. but the size of the deals are so large raising cash to pay off debt simply is not realistic at all so if the property goes into default your junior position investors find themselves wiped out.Further more thats why a debt fund like Chris has can be a good choice for the very conservative investor..

I don't see them showing up or paying any of the back rent that's due to become current if they wanted to stay.

My client would have been willing to pay up to the whole listed price because the property will be worth ~$525k ARV. 

Step 2- close and start rehab-- would need to pay holding cost during rehab?

I understand I'd take a pay cut being an agent for the first few years, but in exchange, I'd be learning about the market and building a network as I move towards Commercial multifamily.

I'd also add to that that you are paying a 20% withholding tax on gross rental income. 

Section 8 refers to a voucher that some people use to pay for their housing.

I'm being required to pay another application fee and then $600 application fee to hopefully get this approved by the Board to allow me to continue running the STR that they approved 6+ months ago. 

Google for a Service Agent who does Evictions and pay to get them out.