Maybe once my debt is paid down it could be a consideration.  

You will spend considerable time, effort and cost to bring the property into compliance.

Due to energy requirements, water heaters 55 gallons and under will grow in size due to increased insulation and will need approximately 3 more inches side to side and 3 inches taller install height.

@ Scott K, what is your deal with Detroit...geeze it seems like whenever you have something to say about the city its something bad...granted you don't like it but when you start to attack the residents you sound like an ignorant racist..EVERYONE from the city are not "HOOD RATS"  But when you stay in Madison Heights and probably scared to cross over the city lines you will most likely say those things..obviously if you go downtown where you feel safe you will probably say ignorant things like that.  

If that's not a consideration, I'd pick the unit that needs the most work so you can get it up to your standards ASAP.Check the leases and state law, even if they've reverted to M2M, there could be something saying you need to give them 60 days notice or the like.

I agree with Jon to a point, the reason you have reserves is to cover unexpected expenses and having 6 months PITI means you'll generally have the payment covered, the regular rent may cover more such as a minor repair and clean ups for that vacancy.Having additional properties and holding funds for all isn't really necessary as a slush or escrow fund as the chances of having extended vacancies or expenses in all your properties at the same time is pretty slim.You should have the deductible for your hazard policy as well, if you have an insured loss you'll need.You also need to consider your ability to access other funds, not just from you fund but total assets and the ability to borrow quickly.Jon's method is pretty safe, but as you add more properties you can fine tune funds held in reserve taking into consideration your abilities to cover a disaster. :)

You can write up a purchase offer with your friend as a short sale and submit it to the lender for consideration.

There is a long list of "concerns," one of them being that the basement stair height is unsafe?.

In my county, there is no limitation on how far before that date the comp can be from (though the further away from that date the less likley they are to give it much consideration). 

This stuff is worth investigating and deeper consideration, map out your business plan and devise agreements around the big picture and not to just what is to be accomplished but also as to what might be accomplished allowing you to grow and expand.