And until the tenants are obligated to pay rent to someone else and properly notified of it... that's where those payments will be sent.

Here's what I know of the numbers: House is 4 bed/3 bath, 3100 sq ft$55k is owed to bring everything current (HOA, mortgage, fees)$8-12k for rehab - general cleaning, landscaping, 1500 sq ft of carpet, interior paint in some rooms$164k - current loan balance, $155k after bringing loan current, PITI is currently $1076 @ 3.5%$1800-1900 current rents in the areaIf the loan were called, I would be able to pay it off. 

If she was paying you the rent, than it would qualify as a rental property.Also, make sure when she deeds you the house, the transfer is accounted properly.

Are all of the mechanicals working properly?

For the houses, CBIZ and Proper provide short term rental insurance, everyone is using one of those.

Yep, I'd provide proper notice to terminate for sure.

While I am new and probably not the best person to offer proper real estate investing advice at this point, I can tell you that one of the common themes I hear from talking to many successful investors echoes what @Jay Helms said above.

Allows you to go after another investment much sooner and grow faster. let your future tenants pay down/off your residence balance.

@ George  Blower I understand that part...so basically I should have 6 months reserve expens and rest of all the balance I could use as down payments...would that be wise to do it or are there any other better ways I should purchase the property.

The amount of the cash out -- the amount over and above the loan balance you refinanced -- may be deductible depending on how you used the cash out proceeds.If you used the proceeds of the investment property refinance to improve the property then all of the refinance mortgage interest is deductible for that investment property.