What do you consider a small apartment building 4 units or 20 units?  

If you rent, start with buying a small MF and rent out the other units. 

What made us stop is when we had a Section 8 resident that did some damage in their unit. 

But, could I minimize risk of renter defaulting on payments for the 2nd property by turning this property into a section 8 housing unit with guaranteed income from the gov't?

It wouldn't change your loan amount because lenders are conservative.You could explore 2-4 unit properties because lenders will count 75% of the actual or potential rents (whichever is lower).

., in-unit washer and dryer or shared laundry room)]Appliances: [Specify the appliances included (e.g., refrigerator, stove, dishwasher, microwave)]Utilities: [Indicate whether utilities are included or not]Pet-Friendly: [Specify whether pets are allowed or not]Outdoor Space: [Describe any outdoor amenities like a backyard, patio, or garden]Additional Features: [Mention any additional features like hardwood floors, fireplace, or walk-in closets]Property Highlights:Spacious and well-lit interior with [describe any notable architectural details or design elements]Open concept living and dining area, ideal for entertaining guestsFully equipped kitchen with modern appliances and ample cabinet spaceRelaxing master suite with a private bathroom and [mention any unique features][Add any other notable highlights or selling points of the property]Location and Neighborhood:Situated in the heart of [City, State], our home is conveniently located near [mention nearby amenities such as schools, parks, shopping centers, and public transportation options].

A relative lives there now and has a few units giving a regular cash flow but they say the market is over saturated.

Investment Info:Small multi-family (2-4 units) buy & hold investment.

This is a 4 unit property and luckily the damage seems to be contained to the one unit and no tenants were harmed.

Keep it simple.With real estate it almost never makes sense to acquire LLC units over acquiring the assets.When you acquire LLC units, you are also acquiring any unlisted liabilities of that LLC - say someone had a trip and fall 3 weeks before you bought it, and then they sue the LLC a week after you close on the purchase... now it's your problem.