We currently receive  $1,000 in cashflow a month so it is not a total loss.After talking with some friends and other acquaintances about it, they said that I should sue.

I posted a quick intro last night and wanted to zero in on 2 specific questions with these goals in mind.1 Buy reasonably priced (aka cheap) condos to rent and receive some immediate cashflow likely out of state since the market we live in isn't conducive to cheap real estate.

Apply for heloc at 4.75% as my property received a tax appraisal of roughly $40k higher than my market price.

If your old loan was $400k and your new loan is only $300k you have essentially received taxable boot... 

Another development, he hasn't replied to me since this Wednesday and today sent me a text with another story apologizing for not responding and decided to send the $50 late fee (which I received).  

If you intend to hold as a rental, then you will pay capital gains rates as long as you hold more than a year.In your case though, a cash out refinance is not a sale.Because this is not a sale, but rather just a loan, you won't be taxed on the money you receive.

Don't get caught down the road when a tenant moves out & you need to renovate but can't because you've only been receiving  $100-200 a month cash flow & don't have the money to renovate or refi. 

They received nothing from insurance, yet their houses were essentially worthless.

Are there an established local RE investor willing to grab lunch or coffee in NYC to talk through what they're doing and lend some insight to a newbie? 

The deadline is very strict, and the custodian must receive the money by the deadline.If it's anything other than A or B - there could be some important complications.Once you acquire the property, ideally you should limit your personal use to no more than the greater of: 14 days, or10% of the total days you rent it to others at a fair rental price.If you exceed this number, your tax deductions will be limited.And when I say "personal use" it does not mean just you.