What is the best way to go? 

Bud, There are many ways to go about this .

Sorry to be so blunt, but I don't want you to go in blindly...and you would be.  

You can set occupancy limit's and a person is an occupant no matter what age.Your occupancy limit per size apartment must be consistent and not exceed city code standards.I like quite buildings my units are desirable enough that a single occupant can still afford a 1 br. and I limit my 2br units to 2 people.. 

Sheriff's were called out and essentially, we were told that we would need to go through the eviction process, even though they essentially broke into the home, furnished it, turned on utilities, and established themselves as tenants by trespassing.

If it is ok for us to stop by their house what is the best time to go?

I think I'm going to go with 2.5% as @Marissa Carroll mentioned.

I need some guidance on where to go to obtain a home that I can fix up, move guests into and begin to generate positive cash flow.

Therefore, your #1 Solution would be the best way to go.  

Mixed use probably isn't the way for me to go especially since this is my first property .