@Michael Win Your hold time on the current property could be an issue but here's the reason why - There is no statutory holding period before you can do a 1031.  

wayne, you are wrong. check with the obama adminstrations ruling in 2009. they put a limit on the number of houses a bank can release to market in 2009 because the flood of foreclosures hitting the market was killing the housing market. and micheal has an excellent idea with contacting the owner, but here is another idea. the last step in foreclosure for a bank is to have a foreclosure/ trustee auction. usually held right at the county court house. sometimes called a sheriffs sale. you can go to this auction and bid against the bank on any house. in most cases the bank wins, but not always. you could get a decent house for a decent price if you want to outbid the bank. they are only going to bid just so high. 

Thats a win-win in my book

I don't want to get on the bad side of the securities watchdogs, but I do want to grow my business and create win-wins for other investors. 

I am assuming whoever "wins" the auction will inherit the mortgage at it's current principal amount?

I understand that I'll need to add value to my mentor in order to make the relationship win/win.  

Winning the game means picking the investment alternative that pays the most in total.  

You will eventually win. 

Do a counter claim for the fire damage caused by the tenant, just in case you will be told by the court to pay something, the counter claim will help the court determine final figure, they will decide how much the tenant will owe you also, ie if the court sya you have to pay the tenant 3k, then if your counter case wins 4k for the tenant pays you 1k, something like that.Consult with a lawyer when you do something, pick their brain so you will be ready to defend yourself.Another option is to have a paralegal look at your paperworks before appearing, much more cost effective, specially if they work on a lawyers office and don't run a paralegal business.

It's a win/win- We save upfront $ on acquisition/closings....