I'm still learning a lot about this and our initial thoughts were to find a place with tenants.

I would recommend focusing on local markets initially before expanding to out-of-state opportunities but if investing locally isn't a possibility, consider checking out Columbus OH. 

depends on the market. in hot markets if you dont Proof up with your initial offer your not getting into contract in the first place.I suppose this thought process works with unsophisticated un represented sellers. 

However, I’m still unsure if I should keep the initial estimate from the contractor even though we are minimizing labor and cost of materials. 

We initially tried splitting utilities among tenants, but it proved too complicated.

The additional amount in yr 1 was to help decrease the initial downpayment-Tenant responsible for all maintenance (but I did purchase them a home warranty to use)

Also make sure your contract allows for obtaining financing after the initial seller financing term.

While buying someone else's position at a potential discount is great, I would rank this endeavor as a magnitude of difference harder than making an initial investment.  

Here’s why it might be a smart move:Maximize ROI: With leverage, you can control a larger asset value with a smaller initial investment, potentially increasing your returns as the property appreciates.Preserve Liquidity: Keep your cash available for other investments or emergencies while still participating in lucrative real estate opportunities.Tax Benefits: Deductible mortgage interest and expenses can lower your taxable income, enhancing profitability compared to an all-cash purchase.If you have the means to buy with cash initially, you can later refinance to unlock equity for further investments or improvements.

Most conventional investment property loans, which offer lower interest rates and 30-year amortization, require the property to be in your personal name.As a result, many investors initially secure the loan in their personal name and then transfer the property into an LLC.