The agent ended up paying the claim in settlement.

She went to an attorney and they said that it was not easy to prove that the previous owner knew about the issues and it was expensive and there was no guarantee of a settlement. 

Robin, I did not offer an easy answer but I hope I provided a framework for comparing the two locations.

Based on the financing you described, it sounds like it's going to be owner occupied (by you) for the first few years, so I don't have a good framework to evaluate that as an investment since it's not, really, at least until you move out and rent it.

The horrible part is; you can pay your attorney $30,000, win a settlement of $50,000 and the court cannot force your contractor to pay you one penny.

These investments benefit not only the taxpayers making the like-kind exchanges, but also generate jobs and taxable revenue for unrelated businesses upstream and downstream from the exchange transaction, such as real estate brokers, title and property insurers, escrow / settlement agents, lenders, appraisers, surveyors, attorneys, inspectors, contractors, building supply vendors and more. 

Settlement attorneys and appraisers charge for their services too.$18,000 year in rentsOffset the rent with $2,400 year for taxes and insurance (in your market) and yearly payment total of $8500 on an interest only loan that does nothing to reduce the principal balance.Most properties require some sort of maintenance. 

Look at your settlement and truth in lending statements and learn how to do some of those high cost tasks.

He started of small, pocketing client settlements by not informing them instead of only contingency fees, such as in Daniels case. then the schemes get larger and larger.

Generally at settlement or the application process you will have to sign something about where the money comes from and whether there are any side deals the bank should know about.I am not going to sign anything that can send me to jail for bank fraud.