I'm not telling you NOT to improve/upgrade the property, but I'd exhaust all free/cheap options to market it as-is first.

As previously mentioned, Cash for Keys may be an option.

I would probably keep the other house regardless of what I do because of the low interest rate.I am now wondering if I should hire a Qualified Intermediary (my realtor calls this an "Accomodater") so I have the option to buy a one level rental, stay where I am at, and if in the future I am unable to live in the two level home I am currently living in (our second home that is my primary residence), convert the rental to a primary residence.

Looking at the rough numbers and we are comparing apples to apples ie: area and appreciation, I think the first is a better option because the cash on cash return from the investment cost to rent ratio.

The syndicate ran out of cash reserves and doesn’t have enough to purchase the required replacement rate cap.Foreclosure/DIL/short sale may be the best option.  

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I'm particularly interested in areas that haven't yet experienced a real estate boom but are on the cusp of growth.Additionally, I'm looking at options for managing these properties.

One of the biggest STR insurance companies in this area is Fudge Insurance , and they always have had the option for my clients.  

You will then have a few options with that rent money....you can put it into principal or you can start saving it to purchase yet another property.

You have 4 options...1.