Aside from some of these issues is there anything in the numbers that doesn't look right?

My long winded intro leads to the question what do I do if the month to month renter doesn't vacate?  

I know that doesn't exactly address your question regarding the 3-plex being considered an investment property by FHA, have you talked with the loan officers about providing proof that your duplex is already fully rented out, to show your intentions of occupying the 3-plex?

I'm not a Lawyer, and this is not to be interpreted as legal advice, however, here is what I see has happened:1 - Faulty Option contract made worse by Owner's actions:  Somehow, even after the contract to buy has come and GONE (my math says 2007 + 5 years doesn't include year 2018), the tenant buyer has been allowed to continue to make (and have accepted...BIG problem) payments on the Buy Contract. 

It either has trees or it doesn't.

You would need 10 of those to earn $3,000 per month, which doesn't include setting aside money for tax income purposes.You don't need a college degree to become an electrician.

Originally posted by @Joey Isidore:@J Scott you must have quite the time on your hands.I apologize if my point didn't come across as intended...To address your question more directly:  There is no way for someone who doesn't know you, your situation, your goals, you expertise, your location, your time availability, your acceptable amount of stress, etc. to tell you which path is better for you. 

However, it doesn’t take much more than a little common sense to figure out real estate is still the best investment for most of the population.

They are allowed to tell their mortgage broker that you are paying it now and most of the time it doesn't affect their debt to income ratio. 

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