I do have property management in place, so could self manage if thing went awry to reduce my monthly expenses.

HH income is about $130k excluding bonuses and we have no other debt.I'm having trouble determining which scenario is the best approach given the details.Scenario 1: Refinance the $88k to 30 year, no cash-out, drastically reducing the payment for us now and for rental cash flow.Scenario 2: Cash-out refinance up to 70% LTV.

When you take out full height walls you reduce the structure's resistance to wind and earthquake forces. 

I’ve considered The idea of just letting this one slide in order to alleviate the stress.

If the property owner Properly contests the lien, the time to file suit by the contractor is reduced to 60 or 90 days. 

Again, your attorney (experienced in REI, not just a RE transaction attorney) is your best advisor.If all of your partners are both investors and GPs, then a JV should be sufficient.Money spent on professional advisors, whether attorneys, CPAs, etc. is well spent and will improve your returns and reduce potential headaches in the future.It also looks like you have a bridge loan on this property which, given this market, could be an issue at year 3. 

The rest of the year had reduced occupancy and reduced rates.  

It's NOT a perfect strategy for all, most or even many situations (I can't stress this point enough) although this sounds like it may be an ideal situation for such.

When I look at this - my biggest kick in the gut is the commission piece on exit, so I am getting my license renewed to reduce that - but I think the questions above still warrant discussion.Appreciate the feedback in advance!

That number was traditionally at 10% to 14%, so in many cases banks have had to reduce that type of lending by a full 50%.Pile on top of that the fact that in the mortgage biz, revenue comes from the loan sizes, while expenses come from the number of loans.