I will be left holding the bag on it, or just trying to get a LARGER long term rental rent payment if this law is passed.  

His loan statement says he owes a payment of $9,000 and to bring the loan current he needs about $19,000. 

Our LTV is less than 50% ( yes no risk at all for the bank, and we have top credit score.We already paid the appraisal, environment fee, wasted countless hours etc...The texts in LOI: Financial covenants:-- Min DCR based on actual rents for the first trust deed of 1.25:1.00 based on a 25 year amortization by the end of 2018.And in the loan doc---Property is to maintain a 1.25:1.00 Debt Service Coverage Ratio, tested annually.We would not have paid the fee and sign the LOI, had he included the phrase tested annually.Please understand that the loan  will be for 10 years long, and we are very confident that we will always have fund for the monthly mortgage payment.

I have two options in front of me either to obtain a rehab loan, which will cost me $10k for six months ( points, fees, interest) or just finance the entire deal with my own money (cash).The rehab loan will enable me to obtain an additional property, so in six months i'll have two properties ( one with the loan, another with my cash)  but it'll cost me an extra $10k (on top of the regular down-payment which in any case i'll have to lay out) .

(the only difference is I put 20% down on mine whereas she put less than 3% on hers-so no PMI for me but still paying PMI on hers and her payment is about $300 more a month than mine because of that). 

His loan statement says he owes a payment of $9,000 and to bring the loan current he needs about $19,000.

Your total payments will be significantly less than if the purchase price was 10 or 30% lower but you had a real mortgage.

Then we would take the cash in hand and purchase a primary residence to live in (say ~$50K down payment) and then put a substantial down payment on another buy/hold property to rent out.

PITI: $1,200.5% Down Payment of $163,000 Purchase Price.Property Appraised for $190,000 right out the gate.Originally paid Gas/Water for both units and electric for 1 side, but am in process of switching electric over to new tenant, which should save $140-160/mo.

Ideally the previous owner/manager will have sent a letter letting tenants know the property is closing on X date and the last payment is due to them by Y date.