I lived in Houston at the time and didn't love the prospects of investing there - bad short term market as I saw, mid term was really expensive/competitive, insurance, taxes and buyer competition ate up any shot at making long term rentals work.

This alone was enough to deter me from any further consideration of this property as without factoring in any other information $1000+ per month in insurance ate up any cash flow that there might be otherwise.

I want to take $100k out (less than 75%.Is there an ethical problem and what ate tax implications.

You ate up all the inventory!

And if it is not related to the market cycles then you ate in a bad project and you should try to resolve the issues or again dump the deal and take sone losses. 

It can be ate up quick so the more the merrier. 

Vacancy high taxes, turnover costs, constant repairs ate it up. 

Every loan scenario needs to be vetted to a Tee.

By the time it was all over, the court fees, attorney fees ate up the entire EMD and then some --- this seller never intended to sell the house. 

Sorry for late follow up.Total repair was under $3k so I just ate it.