It completely depends on where you are in the country what the specific rules are.

My question was more along the lines of specifics and preferences.

So if the property was worth 100k when it burnt, you got paid 95k from insurance, you might have 5k in loss to report on your taxes, but again to be specific, you'll need to speak with a CPA on the exact details of your situation. 

@Felix L PerezThere is a lot to explain, so probably you should get with a tax accountant.The short answer is: expenses specifically related to this property (purchase, rehab, holding costs etc.) should be shelved until next year and deducted against the sale price.

The tax impact is generally significantly smaller than the benefits of leverage and the resulting higher cash-on-cash return the IRA receives, but does introduce the filing complexity.The repayment terms would be those offered by the lender, not anything specific to the IRS rules. 

Then do we apply the security deposit to damages and rent owed (lease specifically states we can) and send a bill for the remainder?

We're in our 70s now and our biggest expenses are for a new Lexus every couple of years and first class air fare.

I'm still up in the air on that one.

That said, there isn't a TON of inventory and most of what is available is typically in the 8-12 unit range in a higher risk area.As for neighborhoods, I'd prefer not to post too much publicly as the area is rather geographically large and it's hard to get to specific.

@Bryan Clark I'd make sure all the systems and structure are in working order (i.e. roof, plumbing, hot water heater, heating, air conditioning, etc.).