However, the seller claims he purchased the property as a two-unit dwelling based on Baltimore City public records, yet it’s not legally permitted as such.

You need to choose your strategy based on your comfort with risk, your budget, and your experience and even though the market is cooling down a bit, it's still a good time to jump in.

You called me 4 months ahead of when that hard money loan matures b/c you are smart and realize that time is money.For the 2nd option, it lists "7/25, 10 year maturity." 

For your next purchase, would you factor your financials based on your initial 25k investment, or the full 50k you now have in pocket?

@Beth Julen  Yes, you can amend your return, but you also have the option to file an automatic change in accounting method using Form 3115, which does not require amending any returns

Conversely, if you're interested in short-term rentals, I recommend using tools like AirDNA to identify markets with high potential, based on the market score of the surrounding region.Additionally, understanding your financing options is crucial.

Keep in mind, this is a ballpark figure and may vary based on specific details.

In the meantime, I wrote a book called The Turnkey Revolution and made this post with questions to ask based on the advice in that book:https://www.biggerpockets.com/forums/311/topics/200098-quest...

Based on the answers to the points above, you'll have a direction to go.

All we ask is that you reach out directly to make us aware of the situation so we can review all available options and to fully understand what your goals are.