My tired eyes didn't pick up the active violation dates. 

The ones who are active in the local market should also be able to provide recommendations for contractors.

No one in this forum is going to be answer conclusively either so your best bet is to speak with  a local zoning lawyer and also to the zoning officer in town in detail. 

I don't spend much time on Forums, but my nephew has recommended Biggerpockets to me as a real estate agent who would like to experiment more actively with investment.

The only problem is that you will now have a payment against it if you spend it (which you would on the down payment for property #2) and you will have difficulty (I think) refinancing property #1 in the future with a active HELOC on it.

I bet you are slaughtering part time agents on listing appointments with this comment Nathan.

As of 11/24/2017 I do not know what the status of their current loan is or how behind it is, but looking for what options I would have as far as approach to buy the property pre foreclosure as they still actively live there and the property has been recently updated and in great shape as a turn key investment.

With that said, I think keeping them more basic is a better bet.

As of 11/24/2017 I do not know what the status of their current loan is or how behind it is, but looking for what options I would have as far as approach to buy the property pre foreclosure as they still actively live there and the property has been recently updated and in great shape as a turn key investment.

Either of those I bet you could call the companies to ask how it could be utilized.