My client wants to use some of the money on a passthrough deposit, and I'm seeking clarification on if this is possible without disqualifying the 1031.

We never collected deposits and she hadn’t sent verification of income until after we told her we rented to somebody else.

Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5.

@Henry ClarkWe actually have another new build now but I am not as bullish on storage or real estate in general as many investors are so when you saying we are building aggressively I think thats relative as I feel we have been conservative on our growth and I always sit on large cash deposits.

There's no point in chasing after it and you'll be better off just moving on.In the future, consider using an estoppel to ensure everything the Seller says matches what the Tenant says before you close. 

Deposits will not be returned (full or partial) until all tenants move out.

They don’t have a lease in place and have not been paid last month or deposit. 

However, since we're planning to come up with the deposit, what criterias will lenders look for in us, besides the usual (e.g. tax returns, paystub, liquid assets, DTI)?

Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5.

That stuff will be majorly distressed with REO prices to match.