Personally out of those 2 options I would definitely opt for 3 properties all with mortgages because like @Eric Erickson said, your cash on cash will be higher using leverage, and buying 3 properties instead of 1 will spread your risk - if you buy 1 property and something goes wrong all your eggs are in that basket, but if you have 3, the success of your investment isn't only tied to 1 property.

(basically, don't put all your eggs in one basket). 

Get the hang of negotiation and building thick skin!

I think the hang up is that if something happened it would not be able to be rebuilt as a 3 unit, however a new single family home of similar size would sell for $300Kish.I don't even care so much about pulling all the money I have in to the project out, just enough to where the cash on cash return isn't awful.

Thru your PM/agent on the open market is the best approach.If cash flow is still your primary goal, then hang in there and challenge your PM to do much better or pick another PM who can do a better job with tenant selection.

$8,500.00-Permit -Inspection -Labor -Materials -Balance -Wire Apartment to code 15-4 inch color change LED2-Pendant lights 1-LED Bath Fan -Cat 6 Ethernet run -30 amp electric stove -Heated Bath floor (floor heat supplied by other)2-USB outlets 3-Dimmers -Outlets to code/ outlets or switches on brick wall to be in EMT conduit -Tv outlet -Smoke detector -1 wall accent lighting (fixture provided by other )Hallway-6 - 4inch color change LED-Hallway outlet -Hallway switch -Hang chandelier (provided by other)-Add remote switch for chandelier

We've had several people look at the deal and are confident in the property and its returns, what I'm concerned about is putting all my eggs in one basket.

I bet grandpa loves seeing you succeed and hanging out and helping at the property!

I also see half of the home needs a good carpet cleaning and has an excessive number of items hanging on the walls.I hereby give you until midnight on [DATE] to comply with the lease by removing all recreational and/or inoperative vehicles from my property, cleaning the carpet, and removing the excessive wall hangings.

Once you get the hang of it, you will start seeing things or finding homes that meet what you are looking for without spending too much time on them.