But again, if you're going to take it down to change out furnishings anyway, then the timing could work out well.

Risky for your client and they rarely work out.

I will also need cash to continue marketing campaigns, Very cash intense for equity.

Should I attempt Sub-2 or contact the bank and try and work out agreement before foreclosure?

Govt loans will typically offer loan mods, forbearance, and other workout/loss mitigation options if requested, but that is a feature of the loan, not law.

STR even more than LTR are management intensive and the host can make or break the ROI. 

Turned a single family house that was poorly marketed but in a great area of my city, listed mid-winter where there's less competition, into a duplex for all intensive purposes and used airbnb to rent out rooms.

This is something I would have to dig into your background on to properly advise on which asset class might be better for you and also how much management intensity you desire and/or can handle.3.)

I understand that rents will go up over time and my mortgage payment will pay down the principal, but it seems like investing the $1.43mil into rental properties and/or a low fee US stock market fund may work out better for me. 

If your investment dream does not workout, your risk is lower due to the size and cost of your investment.