I appreciate all the responses and perspective on this subject.

The tenant choose to stay in the property and choose to fight with the landlord.From a landlord's perspective, a foreclosure is equivalent to a tenant not paying tent, then choosing the "quit" option when I post the pay or quit.  

Therefore, it often discourages others from posting here.It is for their sake and to provide a more positive perspective to what's going on here in Michigan.

Different lenders will view the situation in different ways so they should expect to speak with either a mortgage broker who works with multiple lenders or they cn approach nore than one lender to get a handle on their particular underwriting perspective .It is always a delicate conversation and should be handled in an honest and forthright manner.

Try to rent the flip for a year, then sell to get long term capital gains tax rates.Being that its the end of the tax year and I plan on shelling out a lot of repair/ upgrade money into the house in 2013, how would I handle it from tax perspective if I am unclear of my plans for the property (move-in/rental/flip)?

If she was right, I'd have to dramatically shift my investment strategy.

It pays to take your time and come up with thoughtful and smart questions/answers (things that bystanders will actually benefit from reading).If you've got a unique insight or perspective on things, people will definitely want to hear what you have to say - and they are likely to check out your website as well.

Now, actually qualifying for a short sale from your bank's perspective, since you were able to qualify/did buy another home, on top of your current debt, is a different issue.

@Ken Lagana From a legal perspective, the LLC provides some benefits.

Karen; Thank you for your perspective.