Otherwise, seems like a great passive investment with long-term upside! 

On Long Island 250k won’t buy you a house.

Not good I think its a good tool for fix and flip and short term holds but not for long term holds if you have not ability to refi or enough equity to sell quickly even if you do and the sellers loan gets called they are still going to get their credit trashed. . 

Renting it out long-term gives us a $3500to 4000 monthly, we could  rent out one bedroom to a nurse and the other to our daughter but still would be a negative.

Data point: we have a long-term rental in a popular STR neighborhood listed through Zillow right now.Every person who writes asking to do some sort of arbitrage is blocked by the Zillow platform.I don't even have to say "no thank you anymore."  

And then you could take your time shopping for long term financing once you own the property.

I would like to find a mentor/agent who has experience with Foreclosures (HUD) who would be willing to answer questions and work together in the Phoenix/Scottsdale area.I'm on a new journey in life and finally taking steps in the Investor direction... something I should have done a long time ago.

You might be better off finding a long term tenant for the time being.

If you’re not in a rush to tap your equity, holding off until rates come down could save you money in the long run.

A lot of private or hard money lenders won’t mind if you live in the property while you’re fixing it up, as long as you meet their terms.