Most likely you will receive the most benefit from selling and deducting the loss but there may be limits to the immediate deductibility of the loss.

I have a Section 8 tenant and haven't received a payment yet. 

It you communicate your rental criteria to prospective tenants in advance before accepting an application and application fee (required in Washington State), you would not run into this problem.It's perfectly fine to reject an application or approve it with conditions based on legal rental criteria.You may want to use a standard form, such as an "Adverse Action Notice".Here's some information from the one we use:----------ADVERSE ACTION NOTICEApplicant name ____________Applicant mailing address ___________This notice is to inform you that your application to rent the property located at ______________  has been:[] Rejected[] Approved with conditions:[] Residency requires an increased monthly rent of $_____[] Residency requires increased [] fee or [] deposit of $ _____[] Residency requires last month’s rent[] Residency requires a qualified guarantor[] Other requirementAdverse action on your application was based on one or more of the following:[] Information contained in a consumer credit report *[] The consumer credit report did not contain sufficient information *[] Information received in a criminal record[] Information received in a civil record[] Information received from references[] Information received from previous rental history or reference[] Information received from employment verification[] Inaccurate, false, or misleading statements or missing critical information on the application*If you were rejected based on a consumer credit report, you can request a copy of your credit report for free from the below-checked agency.[] Experian[] Equifax[] TransunionDated this day of ________.Agent/Owner Signature _________

id=8472)Fast forward to now... my insurance has said there is $3k in damage, when I received 2 bids from contractors, both at $22k.

I received a summer housing request a couple of days ago.

They received a step up in basis when they inherited it. 

I’m no longer overthinking this subject and I’ll take that advice on not to purchase a property based of cap rate, message well received!

Each of the three receives approximately $1000/month.  

You're on thin ice if you changed the locks prior to receiving proof by word or deed that they were vacating early.

Phillip,Have you thought about structuring the deal as a partnership where your investors will receive a preferred return along with a share of the equity?