Had my first fire, looks like it will likely be a total loss.

Could be a loss or you might break even but learn from it and move on

You can't change out the paneling to drywall as the weight cannot be altered in a HUD-code home.

Suggestions: Insurance, the buyer selects the company and pays it and the note holder is listed as a "loss mortagee" that way if it get's close to renewal, you should get a notice as well about it and then you can check to make sure it's current.

If I pay for consultation now $200 and later for the eviction - it will come up to $1000, and it will add up to my losses.

They may offer to cover your loss.

As @Taylor L. and @Charles Carillo have wisely pointed out, this isn't a good idea.Whenever I have a contractor suggest this I always ask them, "if we lose money on the deal are you prepared to contribute to your share of the loss?"

Does the partnership just need to meet the "material participation" rule for us to take the losses against W2?

With appreciation, the gains (or losses) are estimated, not realized until the future and costly to access either by a refinance or sale.

I am really trying hard not to let it defeat me, but I feel at such a loss from so far away, tomorrow it should help in talking with a new company hopefully they will be able to help me navigate through this.