Willing to exhaust all options as this is a big fish. 

For funding, explore options like FHA loans, personal savings, or creative financing, and focus on New Jersey markets that align with your goals, such as Newark for rentals or commuter towns for house hacking.

Your best option would be to refinance your loan (if any) and get a construction loan for the improvements.

I’m not sure what is the best option here, if anyone could shed some wisdom that would be immensely appreciated. 

What was the quality like compared to local options?

They don't allow auto payments or automatically add late fees, and tenants would have the option to pull their payment back, which is not ideal.

Focus on understanding the rental market, conducting thorough property inspections, and leveraging owner-occupied financing options like FHA loans.

Gas or electric would be a much better option, safety wise, from a house fire standpoint, CO danger, or danger to children or pets from the open flames. 

They won't always be upfront about this with you but if know they're selling because they want to retire, that opens you up to different options vs if they're an investor just selling for profit.

With your income and the option to use an FHA loan, buying a home could be a smart move, especially if you plan to rent it out later.