We have cripplingly low rent/value ratios, we have plenty of new stock coming in (check out  Long Island City).

CAVEAT: I don't know what it takes to build, stock, research and run a mini-mart/gas station.

If I had more funds saved up between deals, I would look into an REIT's or other conservative stocks. 

And remember that PMI premiums are dead fees just like that upfront fee you pay with option 1.  

He has quit watering the backyard and all of the grass is dead as well as some lilacs. 

It is a great idea to learn the differences between asset classes such as stocks and real estateI would then move onto a specific strategy like buy and hold and then visit your reia in your city.  

How many of those non investing friends saw the obvious opportunities in both stocks and real estate when the crash came in '08-10 and took advantage of them? 

If the owner is dead, I would consider just taking the property over.

All you've done iw pay for all of your negative cash flow upfront.What's worse, is your cash (the $1,025,000) is now dead.  

Sell, the $80,000 in equity you have lying dead in the property is costing you $500 - $600 per month in lost income.