I like the area however baltimore is block by block.

Location appeal can change in a matter of blocks.

I watch to see if they park in the driveway, or do they block the next door neighbors driveway.       

I've been around the block a few times. ($50M portfolio) & I can tell you without a doubt it's a terrible idea to put a tenant in the property that cannot pay 1st months rent & an equivalent security deposit.The fact that many people you are talking to cannot afford this is actually a good thing.

Would someone with more experience be willing to shed some light on my mental block here? 

I want to invest in a Sub200K area right now that will put me in about a B neighborhood with working class folks who care about their surroundings/block. 

You don't have to do this if you don't want to, however first may start a foreclosure process and eventually your property will end up at an auction block again.Assuming that your 2nd question refers to purchased 2nd position mortgage note (from the 2nd position lender) if the first lender started foreclosure and you are in the 2nd position, you can only claim any surplus from the auction since you are 2nd lien holder. 

@Damarius Gilbert my big mental block is what do i say to people that contact me from craigslist? 

Kensington is starting to explode as well -- never thought I would see the day -- but if you can find a decent block with fair pricing, go for it.

Ponchatoula DOM can very greatly over just a few blocks.