After this period of time they are escheated.Most of these properties have a tax bill way over what they are worth, which is why they were never bid on during auction.Is there some sort of mechanism in place to try and negotiate more favorable rates with the local govt?

Depreciation should still be in your favor.

Find what can work in your favor.

The market I am zeroing in on is San Antonio due to its good cash flow and very favorable long term growth prospects.

As an individual, you get standard deductions and personal exemptions in addition to your business write-offs and the first (for MFJ) $18,000 is taxed at 10%.In a C-Corp, you lose the favorable treatment for capital gains.  

I wholeheartedly agree, though I still dont necessarily see the math working in favor or holding the asset as oppossed to selling and reinvesting in potentially a more attractive asset.  

It could probably also make sense to reduce the investor's equity to some extent after return of capital, so not remove them, but tilt the balance a little more in the sponsor's favor (and I only thought of this because it was mentioned in a podcast if I recall)But if you're leaving the investor in the deal indefinitely as you suggest, is it acceptable to not talk specifically about return of capital at all in a situation where there is no preferred return?

I always favored the idea of "home" classes or online, but I tend to feel like I'm missing out on something.

If you can show the private lender that you can do this deal, they may be favorably inclined to do future deals with you as well.

I'd look into this option before any sort of commercial loan (which isn't going to have as favorable of terms).