This particular home sold for like $560k in 2006 and the bank took it back at the auction for $225k (loan balance I think would have been around $360k) and there was no second lien or any lien that would incumber title that I could find. 

Your father must be proud of what you have accomplished so far, and the progress you will likely make going forward.I would suggest, before jumping into something, going to a couple of Real Estate meetings near you.

I would have waited about 30 seconds before having it towed.

Should be no more than 28%.Second ratio - Total monthly debts. living expenses plus monthly debts like student loans, credit card payments, car payments, alimony, etc.

My father in law has a gorgeous condo by the ocean that is tile all the way through.

I see a lot of new folks only willing to pay a 20% split to a cash partner, or trying to make it so they have a home run on their first or second deal.

Not only did that not happen the first time because of their screw-up apparently, but didn't happen the second time either. 

My father-in-law recently had tenants break contract and leave early.

Both this year and in coming years as you report the interest and repayment of principle on the second?

If during the screening a applicant gives any push back or questions my lease I reject them based on attitude.Once I narrows it down to the best I have a second personal interview to insure I have made the right choice before accepting them as a tenant.I reject any applicant I believe will be a bad personality fit for my property regardless of how qualified they may be.