The COC will be right around 8%, with $500 in cash flow (after accounting for Maintenace, repairs, taxes, insurance, vacancy, etc.).

I'll second what John said and add that there are a whole bunch of investors asking this very question right now.  

There's virtually no housing or commercial developments, but there's some pretty expensive houses there especially right on the water.

This depends on how the deal is structured and what rights and responsibilities you retain vs what you transfer to your current tenant.

Have you ever had it where a tenant disputed their eviction report and/or background/credit check, and it turned out they were right?

At this point I just need the repairs done.Of course they can foreclosure without clearing the first mortgage because the auction will pay the mortgage and whatever is left is dead money as the lien is done with at that point even if the amount from the auction isn't enough to pay off the mortgage.

I would then plan to use this forced equity (since I plan to buy a fixer upper) to invest in another home.I have been constantly reading to househack right into the MFH, but this may take some time for me to acquire the money and purchasing power.

Yea I have a tremendous amount of time in it.  

I would also advise to save for reserves.But there isn't a universal right path.

I would then plan to use this forced equity (since I plan to buy a fixer upper) to invest in another home.I have been constantly reading to househack right into the MFH, but this may take some time for me to acquire the money and purchasing power.