I can pursue a legal action against the tenant or Baselane, but this will cost me additional $2-3K in legal fees besides dealing with a loss of at least $5K of rent and damages caused.

G*d forbid something happens and there is a fire or other loss.

I can afford the loss.

Congrats on taking the first steps toward investing—your vision and planning are impressive!

You may just have to take the loss and move on.

If you reported a lot of expenses and showed a loss, then the loss will be treated as a liability in DTI calculation.

Ultimately I had a vision for how this particular home could easily be improved and rented for top market without much headache.How did you find this deal and how did you negotiate it?

This is because they didn’t budget properly and rent wasn’t high enough to cover actual expenses (repairs and maintenance, cap ex, vacancy and loss, tenant damage and turnovers, etc don’t expect to have any money left over after all of these expenses are accounted for if the rent is less than $1,500/month). 

As you note exiting any RE that does not have some appreciation of a significant amount over say a 5 to 10 year hold generally speaking is going to lead to a loss at sale.

While you shouldn’t categorize all tenants and it’s the landlords responsibility to properly screen, the tenants who reside in better situated housing and pay higher rents are more financially responsible meaning lower rate of rent loss and will generally take better care of the property which combined will result in less time allocated towards management functions if self-performed or more favorable management fee structures if 3rd party management companies are utilized (which ties back to #1, as well).