It was a great location and I saw the potential in the house.

Do you know if we have the right to terminate our agreement with management per ‘breach of contract’ AND tell them we want to take house off of market with them, not move forward with these tenants and to give security deposit back to tenants?

I'm just acting as an aid, as it were and helping to bring awareness to the opportunity for potential buyers.  

I would potentially just keep an eye on things for the first few months more closely and make sure the deposit check clears ;).

My thinking is that if I knock the office walls down and fix the floors and ceilings that suffered water damage then maybe I can begin to market it to a tenant and then potentially give the tenant a blank canvas to work with.

Then move to San Diego in a year or two and deal with management and decisions while I'm out-of-state.I think I have a decent grasp on how cap rates will differ between Denver and San Diego and the implications of this on my down payment and cashflow potential. 

Many investors built a large portfolio by using that strategy and repeating it over and over again because of the favorable financing terms.I suggest you think about potentially finding a home where you could rent out a portion of it to renters, maximizing it's potential and for you to save more money for the next one!

Another thought I had was that after focusing on a few houses in markets that have historically had good equity potential, we could also build a portfolio with homes that have a primary focus on cash flow and get some monthly residual income coming in as well.

Expenses--far from miscellaneous you need to anticipate potential BIG issues.

If you own one free and clear, and it cash flows well, you could even potentially obtain a LOC against the investment property, but LOCs on Investment properties are harder to come by, and usually are offered at local or regional banks and credit unions << These same sources often times do NOT also offer the DSCR, but look more at the traditional DTI route.