3rd party management...and buying larger properties. 

The issue is due to the floorplan, I am having issues having an idea on how to reorganize the kitchen.Does anyone know or recommend an interior renovation design that could provide a design idea?

We went above and beyond for them before them moved out fixing things that I dont believe were normal maintenance issues.  

Only issue is the house is drafty and therefore a challenge to keep warm. 

@Elton Tate what you're running into is agents with little to no experience dealing with investors and investment properties.In our opinion and experience at least 95% of residential agents only know how to deal with owner-occupied transactions.You'll see a big difference when you look at larger apartment buildings for sale (not on the MLS).

Has anyone else experienced issues when purchasing properties after foreclosure? 

Unbelievable • His insurance won’t cover because as it turns out commercial liability does not cover craftmanship defects they need E&O insurance for that, hard lesson learned, 95% of small contractors will not have E&O, it's an extra cost for them and only the larger construction companies carry it.

If after 6 months you find that you don’t mind collecting rent and dealing with the occasional maintenance issue then it might be time to start thinking about how to go about buying your next property.

The main issue that I have is that the tenant has 2 more years left on the lease and in order for me to fix all the mess in the basement I would have to remove tenant. all plumbing, electrical and structural is potentially dangerous.How do I manage repairs if tenant doesn't want to move?

Of course, there is an issue of where do you live for that period of time to establish that you 1031'ed into another investment property...I agree with @Michael Plaks, I don't know how you figured that savings...As for "...harder to sell to potential buyers," the 1031 transaction is mostly transparent to them.