@Ryan Woods if you can house hack then you should do that.

By removing the current tenants who were problematic. not paying on time. and put all 3 new screened tenants. and touch wood... no problems.

I get such a kick watching him skreet with scrap wood by eyeballing it with slippers on knee deep in it.

I was really happy about that, but I wasn't out of the woods yet.  

We budgeted $40,000 for the renovation but went $24,000 over budget when we discovered wood rot behind the walls.

Then you can tell your success stories to your potential private lenders to sell them on investing with you.A  do you go to the first Tuesday auctions in your neck of the woods.. we did quite well there in Atlanta metro for a number of years.OP  courthouse steps are cash and carry. on the west coast there are HML that will put up bid money.. 

We just did a conventional class C rehab and during the process found wood floors under carpets so we refinished them.

Same as a a baker who buys flour, sugar, frosting and then sells a cake You bought a busted down house, wood, drywall paint and sold a fixed up house To the IRS it's the same.  

We just replaced wood siding on a house & did the same extra steps.

How wrong I was and little did I know about how porous wood flooring and painted drywall is and how damaging animal contamination is and deep it goes into the building materials.You're probably right that it would be hard to get anything through lawyers to repair the animal damages.