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

I guess the different strategies FOR ME would be.A- Find a lender that would actually do the refi and pay the tax.B- Sell a property and use those funds to lend as they would go back to the IRA. 

My SBLOC requires that I pay it down to $0 once a year and keep it at $0 for one whole month.

We pay $850 for a WH install, so, that seems high but you are in CA.

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.

I also believe there is a small co-op in La Jolla but only infrequent sales so not good for estimating a discount.

Then he is going to hire subcontractors to do the job and you are going to pay them for that work as well.  

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

They must be very low odds because insurance companies are in the business of making money, not paying out maximums.

My humble advice to anyone attempting to do creative finance is:Creative finance is for experienced investors who have access to capital if anything goes wrong.Learn the lawsDon't use a contract "off the internet", laws vary by state and are also regulated on a federal levelLearn the financing techniques correctlyDon’t skip parts of the processDon’t ever do a “kitchen table” closingUse the proper deedAn attorney can help you with the legal work, but the rest you are on your ownYour guru will not bail you out“Investing” in someone else’s deal by providing a small 2nd loan so the “investor” can pay for “cash to the seller” and for “closing costs” so he can do the deal is a very bad planKnow what problems can ariseLearn the responses and solutions to problems before they are neededKnow everything there is to know about Title and what that meansKnow who a "protected class" individual isLearn the "back doors"Learn human natureUnderstand timelinesUnderstand regulation enforcement (some of these "mistakes" have a 10 year statue of limitations ( they can charge you 10 years AFTER you do the transaction) and carry hefty fines and possible imprisonmentThe court doesn't accept "I didn't know" for an answer"Know that the source of the lead plays a serious role in some states and federallyKnow how much of a "profit" pushes the boundaries to invite an investigationYou can be sued by the seller if you don’t do things correctlyYou are automatically at fault if an investigator or attorney or regulator gets involved.