I've seen this happen... not between a borrower and lender, but in other business situations where an attorney brought a suit against both the LLC and the individual members of the LLC.Of course, if the lawsuit has no merit and is a pure act of desparation, it seems to be a waste of funds for the borrower when discussing options with the lender could work towards a viable solution.

They are no income and no doc and are underwritten purely based on the market rent of the property .

Is the $10k+ monthly cashflow purely cashflow, or is that amortization as well?

Drinking a bottle of poison and you get sick, are you going to ask your doctor how to drink that poison so that you do not get sick?!

I earn about $130k gross and of that about $100k is pure cash flow. 

this sounds like a bad situation.My suggestion is to start with looking at this from a pure investment scenario first (where both units are rented), and if the numbers work (I seriously doubt the do) then look at it from a owner occupied angle.

Keeping it purely as a financial discussion, not political one, all that matters is more specific questions like rent control, building regulations, rate of appreciation, population increase etc.

From a pure business point of view, your decision will come down to comparing an ACCURATE ROI on this property to:1) Selling and reinvesting in another property for higher ROI.

I agree with Jay, the Oregon Coast is not for pure investors.

I would be in charge of running the project, construction, all costs, I would float the project.Once the first unit is completed we would put financing on it and the proceeds would then fund subsequent phases, enabling us to progress through the project over a multi-year timeline, likely spanning 3-5 years.Estimated my construction cost would be 350,000 per building (pure cost no profits).