., I totally agree with the exhortation given by @Cal C..I would certainly recommend cashing out the FULL approved amount - but, because unexpected windfalls have a tendency not to be treated with the same care as hard earned savings, it will pay you to be MINDFUL of that fact. 

Learn before you earn!

You can then approach whoever placed the lean on the property for the details on that lien, and if they would negotiate a reduced payment on behalf of the owner. 

Our ultimate goal is to have enough passive cash flow from real estate to replace our earned income which is about $15,000/month. 

I currently am vp of sales for a Public Adjusting firm and I want to use all the money I earn from sales and create a second flow of income by buying single family homes and holding them. 

I always think earning the passive income from rental property is a very good retirement strategy.

In the Rose City area of NLR, many of the homes ARE in a flood zone which, as I am sure you are aware, will increase your insurance and reduce your cash flow, which may not be that much of an issue for you with respect to how high your cash flow numbers are.Best of luck.

If I had to buy in a higher priced area I would do the same thing except use my "earned" funds for a down payment so I could acquire more and set them up to be paid off within 10 years with my cash flow.

Am I legally bound to reduce his rent at all?

If you're self employed, you're undoubtedly deferring taxes on some of your earnings.