I do have other towns in mind as a backup, but my first choice would be to continue investing in the town I already live in. 

A tenant will make choices that are best for them.

However, my choice of properties keep coming up in the red, not sure how to get around this but I'll keep plugging away at it.

I personally think out-of-state investing is a top choice.

And were so Tapped financially  we had no choice but to put it on a back burner, move into my inlaws basement, and loose our stability, security, and stash.

It’s their choice.

@Yair ZarmonOption 2 sounds like the better choice for your situation.

Quote from @Melanie Thomas: If I was given the two choices, I would continue on and work to recoup sunk costs; however, my motivations are my own.

There are multiple paths to profit (or loss) and as an investor you have a wide array of choices for how you seek to maxmize your return. 

This investment in your property could be justified by the increase in rental appeal and tenant satisfaction, making your property competitive and desirable in the rental market.Ultimately, the choice should align with your investment strategy, your relationship with the tenant, and the overall condition of the rental market in your area.