Hope things improve moving forward for you and in the grand scheme of things, $2600 loss I would just chalk up to a lessons learned and one you can continue to teach others about in the future.

In the future, we may consider another larger/nicer duplex or possibly a unit with ADU or separated space in a large SFH. 

Which city, area in Michigan has more potential for growth?

These type of loans typically look at your credit score, the down payment, and the potential rental income of the property.

Will they leverage the income potential like they would on An already built one? 

Option 1 allows you to spread your investment across three properties, considerably increasing your rental revenue and accelerating portfolio growth; however, maintaining several mortgages can be difficult, potentially limiting your cash flow, especially if one property is vacant.

I hope to be able to continue increasing my portfolio and potentially get into multifamily buildings if possible. 

GL in all your future REI ventures.

There's potential value to separating the two from each other. 5.

Your situation is probably better for seeking out "Non-QM Lenders" or potentially other "Creative Financing" options