It's always great to have more equity in a deal than less when you get done with your vision of it.

.- but the total eviction was only 2k , not counting loss of rent. another eviction is the last thing I want.

Do you want full replacement cost if you had a total loss - would you rebuild in that case or walk away? 

So, they would have a balance due and owing if they did not pay.Let's hope they get out of there without too much more of a loss for you. 

Calculate the gain and tax implications of a sale.Do you have any passive loss carryforwards to offset the gain?

If their belongings were damaged or if food spoiled as a direct result of the leak, then I might consider reimbursing them for their losses.

It's going to be a money soak and large loss because it seems like the principal wants to outsource eyes, ears, and skills and is willing to pay someone else to bring their own people which costs 2-4x as much as having some of your subs and eyes on the job.If I had other pressing business concerns, I would sell all of the properties in a portfolio sale, bank the money and repurpose it, and let someone else do it all.

We provide our clients with a profit and loss statement for the entire year when we give them their 1099.

This is due to the fact that we were only looking at properties that don't need big upgrades. as I agree to your point of just jumping in, we want to make sure we don't jump in and then get out to realize the loss we took on it. 

Would they just be passive losses that can offset passive income or can we treat them to offset capital gains from other investments ?