If evaluating something like this be aware that even though it may be grandfathered in...the fire marshal can deem that the homes are too close based on safety concerns and rule that you can’t bring in new homes 

If you could easily cover your costs with rent then it allows you a safety net if you move out and the appreciation isn’t there.

People interested in renting their homes would have to pay a $175 one time registration fee and have their homes inspected by the fire department.Mayor Dave Campana told TV6 the commission would revisit the ordinance in a year and make adjustments if necessary.Campana said the main concerns are fire safety and preserving the integrity of neighborhoods.Click on the link in the related links section of this page to read the ordinance.

Definitely NOT slum lord standards, but renovating the house to meet basic safety standards - to code.

I simply have the place cleaned and take care of any serious safety hazards.

IMO if you chose #1 now you can always choose options #2 or #4 six months(maybe a year) down the road, pull all your 60K back out plus what ever appreciation you have(if any) and move forward. to me in option #3 you said paying interest bothers you and option 1 solves that problem, gives you practice with a new tenant so if they don't pay or u have problems you don't have 2 bills( your old mortgage and your new mortgage) to manage along with the stress(of kicking out your friend and finding a new tenant) just the one mortgage that your fiance already has within his budget(because your 60K didnt' factor into bank financing so you found a home to move to that was within his budget alone(even more safety net) or at least lower mortgage payment and house than if you had 60K to use to buy-down another home. but i digress....Option #1 is less stress , less interest payments,and less of your money with 2 options left over at a later date. like joe said your 60K is safely locked away in the home(minus depreciation) which you can always pull out later on when you are more risk-prove.Still your choice but that my point of view.Good luck!

The two things that Derek said are safety essentials in any Lease transaction. 

This is more of a "safety net"/conservative approach than a requirement (as Andrew also correctly pointed out). 

For example, if there's a  vacancy, you'll have to prioritize your schedule to fill it and have a process in place to screen applicants properly.

For those who choose to buy property without purchasing owners title insurance, the type of deed used and the ability of the person making any warranties to back them up is a huge factor in the safety of your investment.