so again, it's just a tough market. 

(Or I missed it, answer is the same either way.)Please make sure you know the security deposit laws/regulations for your market inside out.

@Jay Hinrichs Yes still good money in flips and new builds to be made especially with off market deals.

You now have $5k in unreimbursed expenses, and 2 houses; one with a $200k mortgage worth $250k (giving you $50k in equity), and; one with a paid off HELOC, value and mortgage unknown, but presumably with more than $165k in equity.You should also treat the $5k unreimbursed renovation cost as a debt and pay it back (even to yourself) accordingly.There is no tax due because not only did you not make any realized gain, but there was no sale. 

The problem is, the inexperienced operator hasn't perfected the ability to buy off market properties at the purchase price that makes sense, so they often over-pay and then encounter less lending options as a result.

Thanks in advanceThat is pretty standard in Midwest markets.

Anybody can market a set of trust documents on the internet. 

House is collateral for lender.

If you want to network or ask specific questions about your local market, go to your local real estate forum and connect with investors from your area: https://www.biggerpockets.com/forums/86-local-real-estate-networking5.

Any words of wisdom on buying a house off the courthouse steps?