I would be using the full amount of the exchange plus adding cash to cover the amount owed. 

How can we effectively pursue the charges if the tenant refuses or ignores the responsibility to cover the repair costs?  

Not sure about state laws for the insurance payout angle but if possible, you can always try and get a contract to purchase for much lower and close after seller receives insurance proceeds, then you can potentially have equity and a deal.But based on your existing numbers, taking it down as you stated would not be a good deal in my opinion and based solely off the info you have provided thus far.

Miscellaneous - Check out his Better Business Bureau page, that alone should be enough to scare you off: https://www.bbb.org/us/wa/tacoma/profile/construction-services/fortune-foreclosures-llc-1296-22949795In this YouTube video DJ posted a few years ago from the fake awards ceremony of his "acceptance speech" the host has a lengthy introduction for DJ (almost surely written by DJ himself) stating that he has been featured on the cover of "Personal Real Estate Investor Magazine."

Prop 13 limited prop tax increase to 2% per year for existing owners. 

Quote from @Rafael Espinoza: Their credit score is basically non-existent and worthless, and they have no rental history?

Insurance companies have many exclusions and they may not cover everything, but they can help to pay for some of the costs of a lawsuit.Good:Using one LLC for all of your rental properties.

You could ask for a concession from seller in the form of $X to cover the cost of eviction and vacancy resulting from a non-paying tenant.I would not get them to start the eviction process unless you intend to wait to close until that's done (which could be a while).If the deal is solid and has good cash flow with market rents then buy the property and then undertake the eviction.

I chose the latter and while it's gave me the ability to fund some of my marketing and cover other expenses I found it difficult to have a foot in the door of two completely separate, unrelated fields. 

(old clients, new leads, random tax record lists (FSBO, Pre foreclosure etc) You can do this remote and just book appointments for anyone in the real estate industry.