I initially hoped to ask the seller for a credit to fix however I am hearing that the amt of credit you can ask the seller is limited by the closings costs amount (in my case max it will be $12K) so I am not sure what to do.

I currently have a credit score of 720 but no cash.

Take the pets photo, get proof of insurance, shot card registration, rabies and whatever else makes you safe and then I have no problem renting to pets.If they pass that inspection show up at their current residence and ask to go inside and inspect for pet damages.

If you're committed you'll do whatever it takes,"  - quote credited to John Assara.  

The lawyer told them that when they sell the house they can negotiate a settlement for perhaps 1/2 of what they owe.Their credit has been significantly affected by the heloc default.

I would certainly reach out to an Mortgage broker in your area, if you can find a good one they will pull your credit and help you form a plan as to what you will need to be able to qualify.. ie next year you need to net 102k to qualify for x amount and a score of y so you can buy this property.

I really want to turn that active/ordinary rarned income into passive income as soon as I get credit and learn more about rental properties, leases, etc..

I am debating if I should do a 1031 exchange, take a equity line of credit, refi at a higher interest rate than my current interest rate and take some equity out or simply sell my investment property.

I am closing one in Charleston next month that is the case.. my agent brought it to me.. to make it work there could be no fee up front .. but we will build 3 750k specs and they will get list backs.. everyone wins.. plus they know we are cash and can close.. you need cash in this end of the business.As for small subdivisions we do those in Oregon.. and its quite cash intensive and credit.. we just wrapping up 23 homes and that took 600k  in cash and 23  300k vertical loans.. so you need someone with the cash up front can let it ride for the 24 months start to finish and has the ability to walk into the bank and borrow 7 million dollars in 6 months.. these are doable but usually takes a person a decade or so to get the experience behind them so that the lender will work with you and the investor or you need your own cash.. 

As an example, if one investor is the 1st to commit, I credit them with giving me the momentum to pursue the deal.