Less than 5% of decent loans go all the way to foreclosure and it is not as bad as you might think.

He tried to swindle a new investor I know out of a deal by trying to sell her a house with a bad title. 

The bad news is that you are not likely to get what you want here.

Could you cover your deductible, plus more, if something bad happened? 

I am trying to get some feedback from anyone who has had experience with the Baltimore Tax Sale process whether good, bad, and ugly. 

You can factor 10% for repairs and CapEx which helps your cash flow.Then Option 1 doesn't sound so bad having all of your money back and $150/month.

It's likely to cost you much more than a standard eviction and will "reward" the tenant for their bad behavior.This is an example of how hiring an amateur can be far, far more expensive than hiring a professional.

In your experiences, does that generally mean it's a bad location or that there is good potential?

I don't think your exposure is that bad on interest rates, because you would likely be refinancing at the 6 month mark.Your biggest risk imo is did you get the rental income you expected, and did the property appraise for what you thought it would after you financed it. 

The pest control guy said the infestation is very bad and looks like it's been going on for a while.