i recently closed into a property which I bought from another investor who got it through a tax deed sale.

@Sabrina Savillo - You have a good problem, a problem that will put you in a good spot with either choice.

A few things to think about if you live very close to that small town 15-20 mins or less that would be a plus...if its a long drive and your doing a lot of the work then I would likely steer away. 

I just closed on my first house Friday and am doing all of the work myself with my step dad.

This will limit your choices on where to invest and from there you can start networking and building out your trusted team. 

Excited to have another Ohioan/close to Cincinnatian here on BP!

Based on the rental estimates, we would net about $700 a month in surplus income since our mortgage is pretty inexpensive.I'm looking to get any and all opinions as I want to make the correct choice for us and also want to make sure I don't screw anything up if we do decide to choose option 2. 

I’m not sure the specifics, but, we are currently doing/have closed many recently lower than that on 30-year fixed DSCR loan (individual or portfolio).

They provide a document confirming this at closing as well.I would not recommend lending money directly peer to peer for your first deals.

Unless rates have dropped or stayed close to the same than a cashout refinance might work and take some money out.