Tenant was acquired with property upon closing(they have lived in their unit for 2+ years with on time payments).

I always thought that in need to invest where I lived and for may years invested in bad areas that I thought I needed to.  

Like Greg mentioned, I would be concerned with his/her responsiveness while I was living there. 

Part of the issue depends on what market your buyers are from and where they live..

Depending on your current living situation, you could do both. 

It's similar to an FHA loan, where you are buying it with the intention of living in it.

Consider why someone would want to live there—proximity to work, schools, or other conveniences—and what amenities you can offer to enhance their experience.Key Amenities: Amenities can set your development apart.

Live there for a year while you fix it up.

Also, the state of formation is likely where internal disputes would be brought among LLC members, so if you and a partner and/or spouse live in CA, you probably want to arbitrate in CA if the two of you had a disagreement.

We actually live in our ADU while we rent out the main house and the intention is to rent out both.