Outside of these claims there isn't really any issue that I can think of.

You can start claiming write-offs once you have an activity with the intent to make a profit.

But cash is king and you dont need to claim it as income!

When the water was turned back on by the water authority, it flooded the house within just a few minutes from gushing water and we are left with an expensive insurance claim.  

It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.Make sure your property manager is a licensed real estate brokerage.Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estateUnderstand you can not eliminate all risk, only mitigate it.

The tenant now claims that he wants to use this deposit for rent payments for January - March.

And her brother could do a quit claim deed to divest himself of the property, and you all could settle outside of an actual transaction.

Can we claim this as our residence and not pay capital gains?

@Garen T.You can claim yourself as the owner I believe in Zillow and update the information.

BRRR in Plano, Frisco, and Mckinney might be a better area to start in due to appreciation alone.I don't know the validity to this claim, but I've read that by 2025 there will be more people working in Frisco/Plano than in downtown Dallas.