Since mid August til now I have lost 5 tenants, well two left deposits and moved in prior to the month.

If you need financial help, ask under the "Finance, Tax, and Legal" forum.

So the actual tax bill is going to be impossible to predict without looking at the individual owners' personal tax situation.How much of a gain do you think you made on your first flip?

Real estate's "gross rent multiplier" is Wall Street's "sales to revenue",  "cap rate" is roughly "P/E ratio".When evaluating markets and investments I tend to start with GRM (or lazily the 1% rule), then attempt to return a cap rate based on assumptions about costs, then I work my way to multiple years of projections (assumptions about inflation, amortization, tax benefits, etc), and if I am partnering with one of my smart friends I have to pull up an IRR (internal rate of return).I also look at regional employment levels, median income to rent ratio in the zip code etc. 

Then you can do a 1031 exchange or sell it at a lower tax rate. 

In Parts of the SF Bay Area its mandatory prior to changing owner ship to see if you have clay pipes and if you do they must be replaced with a new waste line.

I know all my investment mortgages prior to 08 were 6.5 to 7.5 % and that was fine.

Ask yourself, why would the federal government pay MORE than market rent and waste our tax dollars?

Depends on the lender.If it has yet to go to foreclosure and you are trying to buy it prior or at sale - the answer is a hard no. 

I think he is a great guy and isn't his first rodeo with investor funds.We can do some legal checks if you want that type of search, lawsuits, prior names, etc.