The tenants in back apartment were married, was informed by the female that they were getting a divorce but she would be fine paying rent alone.

You may just want to do a traditional refi and take out a HELOC after a couple years as you continue to build equity.Once you have your primary home refinanced, you should be fine.

Quote from @Jay Hinrichs: Quote from @Engelo Rumora: @David KanarekI don't think I have ever seen better investigative research than this.Hat's off to you and sorry for your troubles and everyone else's.Please don't investigate me haha Engelo this is all the Due diligence that should have been done prior to investing its fine after the fact but that's not going to get their money back..

The first one Blue gate said it was a fraud and not my problem. 2nd appraisal came in fine.

There is fine line between the two depending on the structure and source of the capital.My preferred equity partners do quite a bit of due diligence on the sponsor as they are essentially teaming up with them to do this deal.  

And that's ok - I am totally fine to weed through hundreds or thousands of pitches to find the small handful of like minds out there, and I am perfectly capable of investing my own capital in the meantime. 

Tenant took photos and videos but nothing detailed - a single shot or two of a room from the entrance, so is saying fridge was fine, normal wear etc Next - If we are being nice and deducting ‘portions’ of the charges and tenant continues to grind away, or this goes to court, do the compromise and smaller amounts offered negate the full amounts that could have been charged

As long as it is one of the accredited shops, any of them are fine.  

Ok, fine.

If you have a good GC and architect familiar with this area, then you should be fine.