Since I have a finance background, I have a partner that I'm looking to work with on the next purchases.

Eventually they get their wrist slapped and a fine.

This same $25k at 80% LV will purchase a $125K property (a fine property in a fine area) in the Midwest (again not including closing costs and purchasing costs).Now why do you think the property in the Midwest is able to be purchased at $125K? 

We have done a final walk thru yesterday at the house and seller told me that the 2nd floor tenant will be evicted and seller has a court order saying that the tenant must be leaving the house on 4/5/2018.

They will give us a final answer Friday but we are about 100k apart right now, so doesn't seem that promising.

But, some people told me, if city involves, they will destroy all the walls and might set a fine because I did not ask for permit and all the works he had done are wrong.

A fine, or undo the work?

I was a finance major and did most of my MBA. 

If so that's probably why you can't do a final k-1 and 1065 return.

I can dig into these cities all day long on the internet, but because I'm going to be living there as well (not just out of state investing) I plan on visiting these cities before making a final choice.