Then we had to replace areas of framing on interior and rebuild the window framing plus repair the aged window, but you might need to consider new window as well based on how many on that wall. then drywall and any other infrastructure that needs to be done on that wall: electric plumbing, etc. that affected wall had plumbing so new code dictated double wall with insulation on outer most wall which added additional cost. termite damage went as high as the roof truss and I needed to replace a beam, but luckily above the bottom beam was the only affected area.

@Nina Grayson CA laws may dictate something specific, but you need a contract between you and the "reverse wholesaler".  

The actual expense will dictate if the item needs to be depreciated.  

Market price dictates at least each unit could rent for $700 each but I would only go up $50 for now, making the total income $1950, and this is being conservative. 

Your lender will likely dictate how much they want you to set aside for replacement reserves?

Then I have an appraisal conducted with a floor plan that dictates a full build-out of the same space to create offices with kitchenettes, bathrooms, storage closets, etc. then should the 2nd appraisal still reflect a 9.0% cap rate or can the cap rate be lowered by the build-out?

They will dictate what you can and can't do...and they care nothing about your budget or timeline. 

The NAR Code of Ethics (Which is actually law in many states) dictates that all offers need to continue to be presented to a seller even if a property is under contract.

A living trust can be a great tool to not only let you dictate the future of your hard earned real estate portfolio while you are still alive but can help reduce estate taxes, ensure a step-up in basis of your properties to eliminate or reduce capital gains and avoid reassessment of your properties when you die so there won’t be a large increase in property taxes.Long story short, please go see an estate planning attorney!

As a lender that manages MI claims, I can tell you that, A) not all loans have MI and B) not all loans that do have MI have claims paid out on them after a loss and C) going back to what I said earlier where there is MI, all of the rules and processes and guidelines for a short sale are dictated by the MI issuer and NOT the lender.