Average credit score is in the high 500's and the average household income is well below national average.

Did you do a background/credit check?

We were stupid to pay him through e-check and have no credit card protection. 

(Washington doesn't have a state income tax).Given that your return was simple(only ownership in one rental property) - hopefully the damage from the accountant wasn't too bad.There are also education credits(refundable and non-refundable) that you may have been entitled to.

I am looking to buy my first rental property and just started looking at mortgage rates from banks and credit unions.

You will report worldwide income on your resident tax return.You will also be required to file a non-resident tax return in the state that you have rental properties in.If you pay any tax in the non-resident state - you will receive a credit for taxes paid to other states on your resident tax return.

I called my local bank I do business with and they say I have to establish more credit and also have 20% down to get a investment loan for property is there any other avenues to go , this kinda discouraged me but I refuse to let that stop me so any help would do.

One thing I dont like about cozy.co is that it didn't provide me with the SSN/DOB of tenants, which I would need to make sure any evictions I suffer through get on their credit report. 

@Mike McCarthy, not a bad idea except I had him give 2x deposit since he had bad credit back then.

-Brother has a sub-par Credit score, & Income.