So, like they say, past performance not a guarantee of future results.That being said, in principle, you have options if hit with the DOS letter: you can refinance (if in a good position for that) or pay off the loan, or the problem can be cured easily by transferring the property back (and you can play this game back and forth repeatedly with the bank).The main problem you have, IMHO, is the partnership.

I have a new real estate company with no positive tax returns.

But like I said, I plan on moving closer to LA eventually...I'm scared I won't be able to rent out my place later, or if I do, if it will create positive cashflow... 

In my opinion the best choice would be to see what position you are in now and which one will benefit you most on getting the knowledge and ball rolling for you on your own

One down side to going to an LLC is that the county may notice that they are now rentals and may tax you more for the property.  

Sounds like they need to go through probate before they are in a position to sell.

I am a bit reluctant to do so because it puts us in a position where we will have a 30 yr mortgage at $737/mo.

Applicants must receive positive references from all previous landlords for the previous 5 years.Applicant may not have any evictions or unpaid judgments from previous landlords.Applicant must exhibit a responsible financial life.

Luckily, they agreed to take a backup position.

Yeah, if you are in "cash" position.