I'm curious about the size and quality of a house you could build for $375k. 

An eviction will make it challenging for her ever to find a quality rental in low vacancy areas.  

Are their listings detailed with good-quality photos?

The biggest thing to me is buying in quality areas that will increase in value over time.

Fund higher quality cosmetic / light rehab for durability and dignity for tenants.

However, by placing money in a property that I would like to have in order to increase my quality of life, that can also produce some cash flow instead of being a liability that requires money every month, I can increase my quality of life without increasing my monthly liabilities.  

The quality of your tenant is just as important as the investment you make.  

Goes back to that original thesis in a thread long time ago-- quality over quantity.

.• Use some equity from the sale to make this transition smoother.I’m torn between maintaining our current home as an asset and buying  a new smaller house to use as a rental after we move back in versus simplifying and focusing on a single upgraded property Considering factors like market trends, potential equity growth, and quality of life, which path do you think would be most beneficial?

These are good indicators of quality tenants.You can also adjust how much deposit you take as well.