After 12 months you have met the intent required by USDA. 

AND they would also pay me an agreed upon amount monthly.

All other metrics equal- I have much more confidence in a +$1,000/month cash flow projection (or even a relative metric like +10%/year) on a $750,000 house than I do with a $300,000 condo.

The sales pace was impressive, with 91.1% of properties selling within 30 days in April 2022, while inventory dropped to just 0.7 months' supply.

I don't think cap rate for residential RE is necessarily the best metric, but I try and achieve a 10% minimum gross rent to purchase price figure, so a $300K property I am hoping to achieve a $30K/month gross income goal.

(I already discussed this with a loan consultant)Going with scenario one, the pro is that I can charge a renter a reasonable amount seeing as the monthly is fixed at the lower interest rate.

To make matters worse, I am living with my family on the top floor with my three-year-old and my two-month-old baby.

They Pd rents on the 1st of every month. 

.- It barely squeezes out any money per month. 

I am in Michigan, which has the 6-12 month redemption period after sheriffs sale.