If your tenants are the type to drill out the coin drawer lock you may have bigger problems to worry about. 

The winning bidder won't have documents to prove ownership, so how can they protect their money or interests during this time?

Solid market for low income investors, cash flow investors, Section 8 investors, that type of thing.

Lease and estoppel are two different documents.

I see the IRS regs about rental activities being defined as passive, but I don't see anything about a lower rate.I just see that this "passive activity" distinction subjects us to "passive activity loss rules", which limit our ability to offset other types of income with net passive losses.But even that limitation is negated for us because we fall into the "active participation" exception, so we can offset our regular earned taxable income dollar-for-dollar with losses from our rental (if I understand the regs correctly).

I have a plumber who has done this type of work for me and would be happy to share with you.

Given above scenario, what type of property make sense for us?

Your marketWith those up in the board now look for an REI type that works.  

@Tyler Brobst, the generation of income even though you have moved out is one good piece of documentation showing that you are using it for investment purposes. 

On another post, I am working on a property and a couple doors down, one of these types of companies is holding.