I realize that there are going to be some difficult moments with becoming a real estate investor, but I have not exactly had a trouble-free life as an adult.

Getting more will be difficult ?

I work with Redlands planning quite often and it tend to get more difficult every time due to bureaucratic BS.   2)  If there is no lender, splitting the lot is relatively easy although it will take a little bit of time and money but nothing unreasonable.   

A short sale is when a seller negotiates with their bank to accept less than the balance of the mortgage.

Do we pay off loans to improve our balance sheets and cash flow by retiring debt?

I have a property advertised for a private sale and a prospective buyer would like to put a deposit down and pay the remaining balance in instalments.

Unless you have something in writing from property managers saying you can break the lease on the 15th, without fee, it will be difficult to argue that they were letting you out. right now it is a "he said, she said" situation, assuming everything was verbal. billing you prorated rent for January is your only indication that "maybe" they were letting you out early with no fee. if you took this in front of a judge, which is what you will need to do to recoup your loss, it would be up to him to decide who is right and who is wrong.many counties have free legal aid for tenant issues. my suggestion, run it by them and see what they say. if they agree with you, a strongly worded letter may get you your money. if not, you have to go to court, and you will have to decide if half a months rent is worth all that trouble.

If the work is not 100% complete by the end of the Escrow period, extension may implement a .50% (on total loan balance) extension fee that will cover an additional construction term of 60 days.

How difficult is it to manage 40-60 units as an out of state investor?

Finding the right one may be difficult, but you need to search.