Here in California, there are potential statewide mandates that would Upzone properties for bigger and denser developments if they are located in and around major public transportation hubs, ie- metro systems.

Most of the people I’ve worked with find some middle ground, keep some cash for safety, reduce non-income debt and allocate some to investing.  

Ultimately, if you are looking at purchasing more properties I would recommend looking into the Series LLC, as you only have to publicly file the "parent" Series LLC and then you can create an unlimited number of "child" series under it - each offering the liability separation of individual LLCs when operated correctly. 

Perhaps by bringing attention to it at a public meeting the "right" person will hear you/get wind of it and send one of their guys out to spend an hour to "make the problem go away."

The buyer is somewhat handy and may be making improvements to the  home over the three years possibly reducing the 203k loan amount.From what i've read it takes at least 3 years to qualify for a FHA. 

The extremely damp conditions will infiltrate to the unit/s above and will drastically reduce the useful life of everything in the bsmnt. incl. the water heater, furnace, electrical panel, etc.

It involves public notification in the newspaper and such. 

A cash-out refinance will reduce your current cash flow on the existing properties.

ESPECIALLY if they are publicly traded large banks. 

How do you recommend a new investor reduce their leverage in a potential recession?