This can help you restructure your debt and potentially save your property.Cash Out for Lender Payoff:The refinancing process includes cash out that is allocated to pay off your existing lender.

This is specifically what the Colorado nonresident statement is addressing.Colorado is one of the few states which explicitly mention this in their instructions.When you receive a state K-1 which reports positive income for a state, this doesn't take into account prior passive losses as it is up to the taxpayer to allocate income/loss to the specific state on the state tax return.

If the vacancy rate is currently 5%, should I allocate 20% for a Great Recession like event.  

If you prioritize debt reduction and long-term financial security, allocating extra funds towards paying off your mortgage can help achieve your goal sooner.

@Evan Polaski yes the cash that I’ve allocated is going into low volatility liquid securities that also generate some yield.  

I need advice on the best allocation of my money and how to achieve this.

@Kevin Sobilo, is generally correct in what he mentioned, however, there are a few revenue procedures that could allow for a split allocation of investment & primary portions of each where we could still discuss an exchange. 

You can allocate your proceeds in any way as you mentioned.

How much should we allocate to demo such a structure and prepare it for development so that it's attractive to developers?

Experience is key for sure - but there is also the reality of LPs needing to allocate capital and the number of experienced operators available to invest with will likely be smaller than the LPs who want to invest.