Not trying to be a dream killer but there is simply no money to be made in the D.C. no cash flow, no margins to flip, labor either to flip or just hold a property is insane, the money was made years ago, even going forward I see limited appreciation, investing is HARD everyone these days but to the extent there is money to be made you have to go to places that haven’t popped yet.

If you are serious, this will be 100% worth whatever time and money you spend to do this. 

The bank from my understanding will be writing off a loss on this loan as there is not enough money to go around.Here is where it gets interesting, there is a second lien on the properties from a seller of a hotel that the current owner of the 21 unit bought seller finance. obviously there is not enough money to get this guy paid off as the bank is already taking a loss.

As a seller, financing can make you a lot more money, but gives you risk.

. - not a lawyer but I know someone in a similar position who acted as a private money lender (silent partner) on a rehab to generate passive income.You could also look into the many turnkey providers to sites like Realtyshares, Honemestors, etc who will provide you with a K1 for passive income.

Lease also states, that any money received from the tenant will first be applied to any outstanding bills. 

hard money lender?

Flip or BRRR using hard money seems like solid options.

Explore traditional loans, hard money lenders and private investors to understand your financing options.

Remember, there is always an option.You can find another EMD lender and replace his money with the new lenders money for example.