Beyond the reading and the researching networking with local pros is a great way to gain a deeper insight into the market here.

I would dive deeper and see what the reason they are selling is, could be foreclosures. 

I used it on and off for a couple of years but never delved too deep.To help answer your questions:1.

If you can afford it and get a return I think the long term way to go is the deeper renovation.Now- if you think the downstairs is the diamond in the rough- then get her switched upstairs and start down there.

It seems though that a vapor barrier would have issues with maintenance down the road and whatever is deeper in the ground after a dry out would never resolve.  

My question is that which state / cities would you guys recommend to dive deeper for a first time buy and hold Canadian investor in the US?

To dig a bit deeper, is there anything that let's you store things for repairs such as paint codes, maintenance man info, etc.?

I once wanted to start in commercial w/o any experience, money, or connections... and I had a few casual interests from people who wanted to buy in w/me when I found a property....long, long ago.THEN, I got sober real quick as I began getting familiar with my market.Not to burst your bubble, but if your first question in delving into multifam is "where do i get HML?"...

These will let you know if you are in the ball park or not, then you can dig deeper.

There are still deals out there, but you have to dig deeper to find them and use resources like Wholesalers, other investors and sources like @Donna Genovese, @Bill Florence and @Jeremy P. have suggested.