If you are planning upper scale or even basic multi family,  I would recommend doing all 3 bedroom units.  

Can you lease option it for $80k with nothing down and then lease option sell as a fixer upper with a higher margin?

I own and live in a small studio in the upper west side of NYC.

FHA underwriting is much more stringent, so if the house you want to buy is a fixer upper, it may not qualify.

I currently live and work in SoCal, but I may ultimately move to the Wisconsin/Illinois area (SO's friends and family).About the property: 7 units (6 Efficiency, 1 2BR) in a 3-Story house on the Upper Easy Side. 

I would LOVE to purchase this property, but as I have never participated in a sheriff's sale, I wanted to ask the BP community if there are any ways to gain an upper hand in regards to foreclosures.

It is not a good idea anyway, but especially not if you think you are going to get houses in the upper half of quality in a city.  

THAT'S the sort of savings you're looking for, even if you aren't flipping.Look into FHA203k loans, which let you buy a fixer upper (including the rehab cost) up to a 4-plex, live in one, with very low deposit down.One problem with Wholesaling is: if they're great deals - why would you WANT to sell?

There is a great podcast from bp of somebody that focuses on student housing and I believe they're in the upper Northwest, maybe Seattle?

I would say upper east side, east side, downtown, third ward, bay view, far south side.