These are all good options.

I wasn't aware it was an option.

I was looking for some advice (viable target areas in Cleveland or Ohio in general, financing options and credible PM/realtor contacts) from the experts here though especially if you are in a similar boat as mine (reside in Canada/Ontario area and invest in US). 

Once we lowered the price to $1 less than everyone in town we filled right up.

This could include lower wages, longer hours, lack of safety, etc.

Now, the older, house-hacked duplex comes on the market as a rental, lowering rental prices as another option available.Someone else moves out of their rent by the room unit, and upgrades to the duplex.

If you have equity and decent credit, a conventional Fannie Mae HomeStyle (or the Freddie Mac version) would likely be the better option instead of an FHA 203k loan (which will require a 3rd party HUD consultant to oversee the deal in addition to having the contractor involved). 

We have three potential options.The first option is for me to completely owner-finance his purchase.

I just received two different verbal offers that I'm willing to accept, but don't want to waste time with someone whose deal may fall through.What are my options to enter into a contract with someone who is qualified?

That’s why you get a discounted interest rate and a lower downpayment, because owne occupant properties are low risk.