They have now prepared a stipulated judgement order for us to sign and return back; in the order, they are asking the court to register a judgement against us; we are not comfortable with this.

Depends on how many days on market, how complex the rehab is, whether there's anything about the property that you can't fix with a rehab (small lot, no dining room, etc), and whether you are doing a fix and flip or buy and hold.In my area, 10%-15% seems to be pretty common, but I'm not too familiar with the Tacoma market.Keep in mind that this number (ARV minus costs minus discount) is your maximum purchase price, not your initial offer.  

Given that, I was comfortable extending to a month-to-month lease and the ensuing vacancy.

I think if you need the cash flow right away, then go with the best of the worst.However, if you can financially support the vacancies, then I agree with others in that you are better off leaving it vacant and hope to find someone you are comfortable renting out to as opposed to someone who will give you problems all the time.

Sine you are you and you own the LLC, you are comfortable (or should be) with the lineage of ownership and the potential of claims that may arise.  

One of my partners is an experienced general contractor and is very comfortable renovating a partially burnt home. 

I have chosen to focus on the buy and hold strategy as I tend to think that it is a secure low risk way to build wealth over time and something I think I would be comfortable with.

The more deals you do the more people will feel comfortable giving you money.

A few more surprises could be down the road for you.There's nothing wrong with wanting to give good tenants a safe, comfortable place to live.  

Trying to soak it in, hoping the more information I absorb the more comfortable I will get about making that leap.