My question is can the bank come after the new owner at all or just the old owner for the loss.

I agree, which is why I moved from California when I started in REI.Unless you have the resources to hold a negative cash-flow property LONG-TERM (remember, the resale market can flounder as well, and you could find a loss of equity that would force you to hold for 10+ years before you could resell), it's probably not worth the risk.Just my $.02...

Maybe not but still....I'd also be worried if one of my tenants or their guests were injured or heaven forbid worse with loss of life.

As an Accountant you know that lenders don't want to see a Mickey Mouse Profit and Loss Report. 

They are older and live about 25 min away from the property.They are pushing for an offer this week that includes the contents.I educated them on local sale prices and homes that are updated vs homes needing repair, but a realistic rehab sale price will be a tough pill for them to swallow. 

We know it will sell at a loss.

If it happens, none of the Partners will take Cash Flow out until the Lending Partner is fully repaid.As far as natural disasters which can put us in even worse of a situation, we will be dependent on our Insurance which also includes rental loss provisions as well as Damage and repairs.

So if I have a tax loss due to depreciation, etc., when I get asked on the tax software if the Business Investment is at risk, what is the correct answer?

I have also seen many would-be investors get out of the game quickly after suffering losses. 

Everyone is looking for the red pill regarding off-market deals- there it is.