Give them a deadline to complete the project or cut your losses and find someone else that can complete the project ASAP.Lots of hard choices, but that comes with being an actual investor and not all the rainbows & unicorns that many on this site promote.

Many people in my position become homeless and lose everything never able to recover. 

Obviously if you are recovering everything you are spending then at the end of the day your total spent is 0.

So, if you don't, the buyer could potentially seek financial compensation for any damages or losses they incur as a result of the nondisclosure.

I'm a part of partnership that attempted to do a flip in Fl, but due to market conditions, bad contractors and multiple change orders, etc....looks like we'll be selling at a loss. 

You may do a 12 month bank statement program or 1 year Profit and Loss statement to validate your income for the past year.

So, I believe now if the heirs wanted to they could move to reverse the sale, but by now the time that happens the real owner may have invested real money improving the property with no hope of recovering it and nothing to protect them.

It depends on the profit/loss allocation on the operating agreement.

working with our auditors right now on ACL (allowance for credit loss) and learning about SCALE, WARM and all the fun and new CECL terminology.. 

Wouldn't rental property 2 generate its own loss due to depreciation?