I’m going to recognize this as a hard lesson learned and use it to grow my real estate investing expertise from.My question is really, what do I do with these properties now?

Would it be possible to get a 2nd mortgage on the first flat once I have proven cash flow from it? 

I would have felt honored to have been recognized for my abilities and would have helped them at no charge. 

Small operation the Property Manager will know you as well as all of your tenants personally.There is a trade off though.A big company is a proven entity whit proven policies & processes.

Many investors are afraid of private utilities without recognizing how widely they’re utilized and how they’ve withstood the test of time. 

Problem for the OP is that at this point in time he has neither the knowledge to recognize a great deal, nor the experience to put together a syndication, nor the capital to invest.

Terminate this Contract by written notice to BUYER and, at SELLER’S option, either retain the Earnest Money as liquidated damages as SELLER’S sole remedy (the parties recognizing that it would be extremely difficult to ascertain the extent of actual damages caused by BUYER’S breach, and that the Earnest Money represents as fair an approximation of such actual damages as the parties can now determine) as provided in this Contract, or pursue any other remedy and damages available at law or in equity. 

In some courts the judge will grant eviction but NOT a judgment because it can't be proven tenant ever received the notice.

An ADU would need a separate address and would legally be recognized as a separate unit by the assessor.

Let's stick together and recognize that we have substantial influence as a community.