Don't worry about being too strict...we are running a business, not a Pre-school...

Get pre-qualified with a lender (talk to several lenders in your market to get the best rate)2.

Seller carry is not an option due to the home being in pre foreclosure.

@Josh Haney I believe the legal/compliance piece is fairly well covered by those who already commented I completely agree that it's important to retain legal counsel to assist with drafting and also loop in an accountant to confirm structure is arranged with tax efficiency in mind. 

But in my experiences here the couple times I have seen people pursue adding a second story the cost either was so high that the project died out or in the other case it made more sense to demolish everything but literally one wall of the existing one story and then basically build a new two story house around it.

I am an only child and will be inheriting whatever they purchase or their existing home if they don’t sell it.

Short term rentals have existed well…forever!

Tim, Rentals have adjusted back to a pre covid number as quickly as they came up.  

Water scares away a lot of prospective investors immediately- this could be your chance to get a deal.That being said, it could just as easily be a major problem that the seller is trying to cover up. 

With the existing portfolio I have to wonder why buy your primary residence?