It’s generally better to pay taxes, especially if it’s preferential LTCG treatment and make a sound investment with cash that remains than defer and make poor investment decisions. 

Are some banks better for mortgages than others (in terms of down payment, interest rate, length of mortgage etc.)?

You should find out what percentage of the rent is being paid by S8 and by the tenant.Tenants have to sign the rent increase and some won't because they don't want their payment portion increasing.It's also highly unlikely a S8 office will approve the huge increase from $797 to $1300.- BTW: the $1300 includes all utilities being paid by the landlord.

If you are going to school, I'm not sure you'd be making enough money to qualify for a mortgage.Prices in London are nuts and the real estate system in Scotland is not in the buyer's favour as they do sealed bids.I got started in grad school, but had my parents co-sign a loan (for which I made all of the payments and I had the down payment). 

For example, the buyer, if they find problems with the property or stop making payments, can blow up the seller's credit.

When you said you had some money saved up, I was thinking that meant you would have enough for a down payment on an FHA loan.

I’m in Ohio, so I can purchase a property with $40k cash out, invest $10k in repairs, and rent for a couple hundred above the monthly operating costs.

Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty of appreciation.I personally make well over $100k/yr cash flow from 21 properties here.

But, the self-sufficiency test for FHA loans can be really difficult in SF, meaning that the market rent from units you will not occupy must be sufficient to pay for the mortgage payment. 

This is a self directed RRSP or TFSA account that allows you to lend your money out to people with the backing of their mortgage for a high interest rate. 1st, 2nd, 3rd mortgages, down payments, refinances, flipping or renovation money.