The selling option on a short term property, for me, is paramount to going to the casino. 

As previously mentioned, Cash for Keys may be an option.

I'm not telling you NOT to improve/upgrade the property, but I'd exhaust all free/cheap options to market it as-is first.

I would probably keep the other house regardless of what I do because of the low interest rate.I am now wondering if I should hire a Qualified Intermediary (my realtor calls this an "Accomodater") so I have the option to buy a one level rental, stay where I am at, and if in the future I am unable to live in the two level home I am currently living in (our second home that is my primary residence), convert the rental to a primary residence.

Better yet- buy something with a reasonable value add, which gives you more options at refi time due to the equity you build. 

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The syndicate ran out of cash reserves and doesn’t have enough to purchase the required replacement rate cap.Foreclosure/DIL/short sale may be the best option.  

I'm particularly interested in areas that haven't yet experienced a real estate boom but are on the cusp of growth.Additionally, I'm looking at options for managing these properties.

You will then have a few options with that rent money....you can put it into principal or you can start saving it to purchase yet another property.

With residential properties and hard money lenders, they will usually have an option for financing the property's renovations as well.There are a couple of caveats: first, most lenders will require a property down payment.