It wont be my get rich quick scheme but it will pay a constant dividend that will build $30K in wealth each year scaling to $60k in annual wealth creation in the future.

I strongly believe that what you need to know how is if renting is an option that wont cost you money according to the 50% rule. 

Like Bill said, the age wont factor in, its illegal, but they are highly regulated and will need to see proper debt to income to make the payments. 

The church would probably keep good care of the property and they are usually only active on the weekends and evenings which mean the other unit wont really be disturbed by a church during business hours.

Typically a HM loan is done when a conventional lender wont and\or when the ARV allows you to roll in repair costs.

Is it a concern that when the balloon hits you wont be able to pay the seller in full?

I have seen many friendships destroyed by business deals.

The guy had a car lot that was getting destroyed.

Option 2 I feel like our money will be tied up in the property and she wont get a 2nd loan at least for the time being, but well have a home of our own to live in.

If they aren't going to start paying on it and get it current, the lender will move for relief and based on the numbers the OP stated, will get relief and continue with the foreclosure so, why spend $2M filing BK and further destroy credit, to stall a foreclosure for 60 days that's gonna happen anyway.