@Jason Holloway - There's definitely some seller finance opportunities in Sacramento; oftentimes, the terms depend on the seller and what they are looking for.During a transaction, you definitely want to ensure that an escrow or title company is involved to ensure that everything is clean with the transaction, including the actual title itself.The good news is, loan rates are at an all time low right now, so house hacking in Sacramento (either through a duplex or a single family house) is VERY do-able.  

New fence, new roof, new carpet and cosmetic repairs and cleaning.

Will clean up the house and paint it What was the outcome?

This is why you pay a cleaning company to clean.

Bleach with water cleans up a lot.I'd get an assessment of the extent of the issue.   

Should I cash out this amount and replace it with $10k from the LOC or keep the "clean" cash in there?

They cleaned and painted.

Should we take extra measures when having our properties cleaned between guests?

In a high grade asset the tenant pays last month and a small cleaning fee can be deducted or other small reimbursable costs vs they destroyed the entire interior paint job, left  all there furniture as well and the place needs a deep clean along with not paying last month. 

Now since you are buying the properties and the income stream, you are also assuming the debt.While it may be tempting and easier to just “forgive” the debt and start the tenant off under your management on a clean slate, I would not recommend this.