Please do both of us a favor, and write it down on a piece of paper and burn it.

Buffalo changes very quickly block to block (not just ZIP by ZIP) and it is crucial that you understand this prior to writing any checks. 

The third property has a nice cash flow.I am wondering if there are steps I can take to reduce the cashflow issues of the 2 properties before obtaining another property, like pay down the mortgages or should I just save the cashflow from the third property to pay for any future expenses?

I'm just starting out an RE journey and am thinking of my first property this year.

Leaving out auction and foreclosure costs for a second, when you write that check for $220k the trustee is going to pay BigBadBank the $175k they are owed first, then he's going to pay LittleBadBank the remaining $45k, and you will get a clean title as the process is going to wipe the slate clean.

Put it in writing and have both of you sign it.

Many would suggest against RE investing using retirement money but if you go into low risk opportunities it can be a powerful diversification method.

Quote from @Theresa Harris: Get it in writing, change the locks, get the place listed and find new tenants. 

My concern is whether I’d then be locked into only larger deals in the future. 

Usually a plumber can pull out the old caulk and re-caulk in less than an hour.