Buy your next primary home conventional and it won't matter that you have an FHA mortgage.

The chance was missed, though, but an investor who was more creative and open to chaos took it and made it a home run.When I thought about what happened, I understood how important it is to think outside the box and push yourself.

Following Lifestyles practices we improved our single family investing, started investing passively in multifamily, and now are syndicators of three apartments. 

It's all great advice above, but I wanted to add a recommendation that I don't see as often: don't go cheap on your washer and dryer.Nobody wants to work 12+ hours and then go home and fight a tiny washer and a slow dryer.

Curious also did they not get a home inspection?

The school spent $275,000 on repairs, improvements, made paymemts for 6 years, and paid us off.  

I know in Washington state a home owner can do their own work including electrical and plumbing, but as you pointed out has to live in the property for 1 year after completion.If you get licensed as a contractor (in WA state it takes some paperwork, filing fee and insurance/ bond, no test, no experience etc.. )  Then you do the work under you contractors license and no holding period needed. 

Any tips on which is a better option?

@Kristine Ann Thanks for the tips!

If you want to tap into the equity in the home, the bank has to decide how much to value the property on.