He still lives there, he still owns the house.If a chapt 7 is filed, normally it stops the foreclosure for a few months and the Trustee gets to decide if they want to liquidate the property to pay the borrower's debts.

We don't want to declare any rental income or file schedule E.

Finding deals and raising capital is great but one also needs to understand the different financing options\products in the market. 

This will lead to higher productivity and greater fulfillment.Be obsessed with self development: The essence of life is growth.

I had two of these loans fall apart on very good deals in the Berwyn area this past year, and I always counsel caution when considering this loan product. 

I currently have around 50k liquid ready to deploy into real estate investments.

70 to 75% ltv and as far as the dti is concerned it would be calculated on a full doc loan but there are some stated income refi products out there at a slightly higher rate 

Would I just claim this on the Schedule E under Auto & Travel expenses?

need track record  very strong balance sheet and lots of liquidity.you kind of have to work up to it.. unless you have millions in liquidity that your willing to pledge.too me this would be a project you would do once your a mature development company with many projects in the books.

Even in the best case scenario, the ROI does not justify the large capital investment and relative lack of liquidity as compared to my stock portfolio (where I have more knowledge & risk tolerance, even in volatile markets).