He claims the rehab cost came out to 120K and now wants to collect the 40k at closing.

Our lease says she pays all attorney fees if we have to collect moneys owed. 

Assuming she moves w/o paying you can try and collect if you so chose but I would keep doing what you are doing and keep your eye on the price of getting her out.  

I had this strategy to live in a house, for about >5 years, till I am able to get a mortgage for another primary residency , bounce, and collect rent from the 1st house and rinse and repeat, essentially.  

I was wanting to understand what the process would be as far as how the difference between the amount the home sold at auction vs. the amount owned is handled as far as payment to heirs and if there is an opportunity to purchase the right to collect the amount from the heirs.  

1) Get the judgment agreed to for an extended move out date  2) if they have money, garnish as long as attorneys fees won’t consume 3) if you own multiple properties might be worth hooking up with a collections agency (I’ve got a client with 100 doors — will be advising in this case)

If you're working with someone local, you might be able to get away with a 7-8% PM if they're just collecting rent and answering phone calls (not likely if they're a budget PM). 

You can’t give $45k in profit to complain about paying taxes on $11,928.I’m sorry you’re collecting too much rent as a percent of purchase price. 

So currently only 3 can be rented, but a 4th owner would like to rent out his unit so I'm trying to understand all these rules and laws to see if we can collectively change our HOA rules accordingly.

The two months of rent you will collect is not going to be worth the hassle.