Are they overextended, do they pay late on other things? 

Principle pay down is not.

How do I pay taxes on my LLC? 

Hire a PM before you find you have a non-paying tenant living in your home for 6 months while you beg him to leave while paying his utilities/repairs and probably a relocation fee  I hope you sell, but good luck either way  

Just to be clear, did M******** ever pay you outside of Zillow or did she mark the rent as "Paid Offline" without you receiving any funds through any method?

All you have to know is how to buy something at the right price so that it pays for itself.  

Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy.

The down-payment and closing cost shouldn't be that high for him to pay by himself.

I like the benefits of S-Corp, however we wont be paying ourselves a salary.

@Brandon ElliottIt does not make sense to get 12% and pay 10% as you will lose money after taxes….To answer the question about private lending - most do it because they are tired landlords and not necessarily due to funds they have but wanting to be more passiveI would want $250k as many of the lower dollar loans are very risky