@Angela Chen IF you are able to pull the $500k out at any point after you close on the deal, and you can afford to tie up cash for a few months. 

However, if you're convinced the foreclosure is defective why would you want to get involved in what could be protracted litigation and tie up your money?

The question remains is where in the law or process paperwork that would back this request.

For example, if you have more equity in the investment property, and less equity outside of the investment, it may be more practical to get an umbrella policy.If you have a lot of equity tied up in the investment properties then a LLC may be worthwhile, and even having multiple LLCs that limit the exposure of the equity associated with each property.

I’d then have access to the remaining LOC.

Electronic payments might be more difficult to remain anonymous.

If you're tied to LI by jobs and/or family, then moving just to find less expensive RE is probably a bad idea, @Kiersten James.

We would reserve based on the today value divided by remaining life (roof in 11 years, furnace in 9, etc.)

This makes sense to me for two main reasons:  I think there would be a single tap fee to tie into the main sewer line and spreading the costs out over time.I'm sure there are variables I'm not addressing, so please let me know what I'm not thinking about yet. 

Within that 6 month period, the property value remains what you bought it for.