You may be able to get into something there-there are a lot of owner occupant loans with very favorable terms and they are not just limited to FHA.

If you buy in a suspect area you are really limiting your buyer pool to investor buyers.While the strategy with this property is to sell after the rehab is complete and 2 of the 3 units are filled with tenants, we currently hold 25 units in our local market here in CT and the highest amount of units in a given building is 6.

My only suggestion would be to make sure that you are accounting for all expenses/reserves, including but not limited to the below.

Other firms tracking rent trends have consistently ranked Sacramento's rent increases at or near the highest in the U.S. in the last couple years, citing a combination of limited housing supply, rising incomes form Bay Area transplants and a surge of apartment property investments as reasons for the surge.Region Business, an advocacy group for local economic development, issued a statement Thursday opposing the potential measure.

The tenant in fact is not your liability...why, because he is an adult and free to leave whenever he chooses.

Such conversion need not comply with the requirements of the following specific provisions of this chapter:(a) Section 13-196-660 (height limits); however, in frame buildings, four or more levels of living space shall be prohibited and in buildings of ordinary construction, with or without attic living space, five or more levels shall be prohibited; (b) Section 13-196-050; however, all dwelling units must comply with the exit provisions of Chapter 13-160 except basement dwelling units may have a second exit through a room containing a heating plant; (c) Section 13-196-670 (stairwell enclosures); (d) Section 13-196-680 (corridor enclosures); (e) Section 13-196-690 (dwelling separations); (f) Section 13-196-710 (basement ceiling construction); however, if the basement contains a dwelling unit the entire basement ceiling construction is to be wood lath and plaster of half hour construction; (h) Section 13-196-720 (heating plants); however, basement apartments are to be separated from heating plants with partitions of one hour construction.

Isn't there some law where if he doesn't pay tax on the 1099 it would become my liability?

My thoughts: make sure its OK with zoning/HOA, ask your insurance company about liability and any sort of requirements for insurance the tenant would have to have.

Based on my limited experience attending this particular tax sale, the difference in the purchase price on the two properties would likely be pretty close to my estimate for the difference in repair cost.I am now wondering if I would rather have a property that I have to drive a long way to meet contractors occasionally, or meet contractors regularly close by. 

At this point I am planning on doing as much of the finish work that I can to limit any additional capital into the project.