There is an upcoming Florida county foreclosure auction that has the following Mortgage/Lien holders:09/04/2012 1st / Trust Deed/Mortgage $145,000  JPMorgan Chase BK Conventional / 20Y ears 06/1/2016 Assignment Specialized LN Servicing LLC 08/11/2005 2nd / Trust Deed/Mortgage $250,000 Bank ofAmerica Conventional Var / 09/04/2012 Subordination JPMorgan Chase BKIf the foreclosure is filed based on JP Morgan Chase for $143,000, and the successful bidder gets it for lets say $200,000 does he still need to pay off the second mortgage (250K - 55K excess over first mortgage) $195,000.  

I mention to wall painting, no cabinet painting, no smoking on the property, the maximum number of overnight guests I allow, and that no tenant or guest should disturb other tenants with excess noise or the quality or frequency of their guests.

HELOC's are also high risk and the bank/lender holding the line of credit can and will close or reduce your credit limit if you have any drop in credit score, missed payment, or added debts considered to be excessive based on multiple trade lines.Fix & Flips are okay but come with a tax liability but cash out refinance is tax free and you would be putting that cash into another property building your REI portfolio.

Would there be any excess left over after debt service to allocate for property rehab?

Most complaints sound like sour grapes, excessive fees or cumbersome processes.  

I'm the borrower so my perspective is to keep it simple and not as "lender favorable" as a standard mortgage, but at the same time I don't want to skip details which expose my lender to excess risk. 

But then again, I am unique, having previewed in excess of 10,000 homes in my life and reviewed sales documents on over 5,000 transactions. 

Today’s value is in excess of $1m and free cash flow is running $3k.With the Lakewood property I could easily see it valued at $1.3m in less than a year and free cash flow (after all expenses) of $2500+/mo.  

—In the case of a taxpayer other than a corporation, there shall be allowed as a deduction for any taxable year an amount equal to the sum of— ‘‘(1) the lesser of—    ‘‘(A) the combined qualified business income amount of the taxpayer, or   ‘‘(B) an amount equal to 20 percent of the excess (if any) of—       ‘‘(i) the taxable income of the taxpayer for the taxable year, over       ‘‘(ii) the sum of any net capital gain (as defined in section (h)), plus the aggregate amount of the qualified cooperative dividends, of the taxpayer for the taxable year, plus ‘‘(2) the lesser of—    ‘‘(A) 20 percent of the aggregate amount of the qualified cooperative dividends of the taxpayer for the taxable year, or    ‘(B) taxable income (reduced by the net capital gain (as so defined)) of the taxpayer for the taxable year.

For distressed I'd look anywhere where the average age of the properties is in excess of 30 years.