They are threatening to sue to try and get something from you but most likely will not go through with it as you have no written contract in place and in california there is also no non-compete agreements.

I am honestly not sure what the best course of action is in this situation, but I just want to say that you are NOT an idiot.Did you have any sort of written agreement with the PM company when you purchased?

Apply the 70% rule to determine your maximum allowable offer, then negotiate and get the property under contract, ensuring your agreement includes inspection and financing contingencies.Arrange professional inspections to uncover any unforeseen issues, using these findings to negotiate concessions or confirm your repair budget.

My figures are below.TaxDeed Winning Bid: $489.00 (My Bid May 2013)Property Clean-up: $450.00 (mowing, trash removal)Taxes & Insurance: $80.00 (2013 & 2014)Sale Advertising: $130.00 (Signage, Newspaper Ads, etc)Filings & Legal Fees: $245.00 (Deed, Lien Releases, Sales Agreement Docs)Total Costs: $1395 (approx)Sold for: $3250.00 (August 2014)That is better than the 25% I would have received if the property was redeemed during the redemption period.

You have to sign an agreement that you will come up with the cash if the property appraises up to 10k below the purchase price. 

- Pet Policies and Agreements: What are the best practices for creating pet policies and agreements to protect my property?

You would need an agreement in place for cost overruns.

I set up the entities using diff companies and paid about $1000 for all three (I got minimal boilerplate operating agreements).

@Brett JurgensI'm in agreement with @Stephen Morales.

Create a digital folder for lease agreements and tenant records.