Otherwise, you zap your investment account to pay off the debt and then find yourself in the same position down the road.Another thing I would try to do is generate more income.  

The best options I've found are occupied properties in C/D neighborhoods in Sacramento that would generate around 12% COC, but where I likely wouldn't be able to recoup significant capex and where tenants *might not* consider rent their top budgeting priority.

Could they be repaired and be a cash flow generator for your property? 

Your core business is not based on revenue generated from "Hold Deposits". 

I would heavily discount the value of the home and the revenue they generate as not being legally attached to the spaces they are rapidly depreciating assets. 

So to @Jay Hinrichs  point, talk with your family and friends, you may be surprised by the interest you generate.

In this case - the encroachment affects about 3.5% of the property...so that could be a basis to calculate an amount for this (or as a basis for the escrowed amount).Now - I also know the seller has title insurance and may actually have a valid claim IF he didn't know about the encroachment when he purchased (the survey showing the encroachment was generated when he did a refi on the property...but I'm unfamiliar how that process works and how long it takes.

Here are a few I see:Pros for Rehab: You get to see and correct the condition of the house immediately, you get to screen your tenants before giving them the keysCons for Rehab: time and $$ in rehab work, no income until you can find tenants for itPros for Tenants: Income right away and no need for immediate rehab (hopefully)Cons for Tenants: Do due diligence to ensure income-generation (evaluate lease and rent details), mystery quality tenants, unable to fully inspect house conditionWhere would you begin?

They calculated a loan amount and an interest rate, and generated a monthly payment, but the notarized paperwork they signed only had that monthly payment.

You will have to sink 40K+ into it and it will generate less than $1000 / year before taxes.