After a lot of calling around to big banks, I quickly found out if it's not livable, the big banks (Chase, BofA) won't touch it.  

Chase, I agree with the mindset that you have to consider outside of Chicago for landlord as well as tax reasons.

.---- Skelton: California’s housing is a mess — and Prop. 10 won’t helpThrusting all the burden narrowly on developers and landlords will chase them off when they’re needed more than ever.https://www.mercurynews.com/2018/10/09/skelton-cal...

Seems like paying off one property, as you suggest in option #1, to eventually refinance it to buy another property is just chasing your tail. 

In practicality banks aren't usually chasing due on sale foreclosures, but if interest rates rise there might be a business decision to go after these to increase their interest rate yields.

Many answer this buy reducing their criteria for what a "good deal" is (why in the ...) because they are chasing the property instead of the deal. 

The lawyer is going to chase the money not you.

Disability checks from the VA means steady income which in turn means you shouldn't be worried about chasing down rent.

The reason why I'm leaning towards going with Chase bank for a home loan is because they allow for me to put 15% down instead of the opposed 20% for a conventional loan and the house I'm under contract with qualifies for a $5000 grant as a first time home buyer (meaning that Chase Bank will cover $5000 of all fees) Which is a HUGE BONUS.

The hire a bloodsucking ambulance chasing attorney.