Initially I wasn't really keen in renting to a family with dogs but since I do not have an option, I am thinking to proceed.

Not worthed the risk.you could get 7 to 8 percent from interval fund that’s liquid, such as NIcHx.also since options etf exists like TSLY or CONY I stopped looking at real estate with less than 10 percent. 

I'm open to properties without septic as compost toilets are an option.  

The monthly payment on our new house would be much lower than if we chose option 2. 

A few years ago I bought 100+ acres just outside of Montpelier, VT (5 minutes from downtown). At the time, I had no kids and had just sold a couple of my first self-done flips in the southwest, and was really ambitiou...

Some things you may want to consider, it is generally a good idea to have a separate lease agreement from the purchase option. 

Second option, if it's even valid, I could build a new house in one of these new communities and then have the house for another few months and sell it (assuming that it would have increased in value) Any input to any of these two strategies would be highly appreciated!

As responsible Real Estate Investors,  we want to educate them on their options:  Mortgage relief programs, loan modifications, forbearance, short sale, etc. 

But you do have options and good job doing your research first. 

As a option, instead of a commission structure, you can put them on a bonus plan and provide payouts based on a set of criteria.