I'm seeking advice on investing in cash flowing properties in Southern California and Dallas.

You need to know and understand all of the residential rental laws for your state/county/municipality, follow them and seek legal counsel as necessary.

Bill,I guess I should of seeked professional advice before buying the property because I did not separate the cost of land and cost of structures of the property in the real estate contract.

If she is getting tenants in, they should be coming up with new deposits as well, so those can be set aside.She can also provide a note for the 6K, it would be easier to seek damages from a defaulted note than physical damages to RE.

I live in an area with tremendous growth potential but the properties I seek seem to be diamonds in the rough.

RE can be very gratifying.Really helping a young couple buy their first home, making it work for them.Solving problems for others and really saving them from what they saw as devastating or an impossible situation like losing a home.Helping others getting started in some business guiding them to success.Being involved in community, providing safe and affordable housing, no hand out but a real hand up.Assisting people to get back on track in their lives from homelessness.Providing housing solutions through redevelopment cleaning up blighted areas for a better community.Forming relationships with professionals and laypersons that seek your advice is gratifying as well.Having the opportunity to pass on your experiences and knowledge, teaching others how to fish is also gratifying.It's not all about the money, it's more about your contributions in life, to your family and your community

So for example, a taxpayer that lost timberland property used for logging could not replace that property with a parking lot and qualify for non-recognition under Section 1033.Property that has been condemned enjoys more liberal treatment, and instead of being judged by the “similar or related in use” standard, is determined by expansive definition of like-kind similar to that of Section 1031.

In another words, you won't get any special treatment just because the bank owns the current loan (and you won't get worse treatment either).

I would start by seeking a local accountant or cpa for tax reasons and then see a real estate lawyer.

Hi,I am sure you will get more feedback from those who are much more experienced than I (I too am just now making a plan to seek Private Lenders) but my one thought is it might be good to think about options if you do not sell within a year and 'permanent financing' does not materialize within that time frame.