If the consequences of getting nothing were severe and I would be "OK" with taking the 1 million I would choose the green.One last note. 

That is longer than you said, but they also have a trading exchange where you can buy out someone's portion at a discount/premium

If you can go as high as $750 with zero improvements, that might be a great trade-off. 

Would that be an acceptable "trade-off" to renters?

I was thinking about it in terms of the probability of default, rather than the consequences of default.

Investors who buy distressed 2nd liens look for notes where the borrower is paying the first lien because these are more likely to get a workout, so selling this note is a good possibility, but understand that these trade at extreme discounts so you would likely only get a small percentage of what you are owed.

Ask your attorney if there are any tax consequences to being an out of state seller.

Then to buy a house which I will rent out to keep me in gas money :) .I have cash for these projects but I need to trade wisely as it`s my life`s savings.Thanks in advance for all future advice and I hope to be of help to someone here in the future too.

Once I build some equity, trade up and follow the "7 figures in 7 years" plan, but obviously not in 7 years.

There are so many variable to answer that question. as Colton S. said, best way to get an accurate answer would be to talk to a CPA about YOUR specific situation.Some things will vary by state, the entity that you used to purchase the property, if you could be considered a RE professional etc...Here are some things that COULD POTENTIALLY be deducted (again, talk to a CPA):Car millageRenovations (again, not all things)professional fees (i.e. for realtors associations)permitshome officeinspection feesThe challenge is that you can claim anything you want but at the end of the day you will have to face that IRS auditor and explain why a $3000 watch is a valid RE expense and when he doesn't buy it face the consequences...This is why it's better to consult a CPA ahead of time to get your tax planning optimized.