Assuming we have the entire story here, your best bet is reporting to the contractors board, BBB, and if you choose, filing a law suit.

They then review that and choose to fund the loan or not.

Because for an extra $300/m (possibly more depending on location) most people will choose the extra 250 sf and the extra bathroom.

Also, is it good practice to hire a management company and STILL be slightly involved with the tenant as a landlord with fixing minor things, being available sometimes with issues, helping choose repair company as issues arise or is it better to just let management company deal with everything and make all decisions?

You can choose to pay that loan down or off at any time. 

@Donald Kellogg - agree with above and will add this: don't choose Milwaukee for some super low price you have seen online. 

As far as neighborhoods, check out this map:https://www.google.com/maps/d/u/0/viewer?

They definitely would be very hesitant to lend to first time investors that are far from the property.I'd very highly recommend choosing somewhere closer to home.

Personally, we choose nicer neighborhoods where a family might want to settle down.

It would be a mistake to not at least meet him for coffee before you choose your realtor.