@Jake Alger : Option 2 won't generate any cash-flow but at least someone else will pay for my mortgage.

Some folks look at commercial buildings as 5+ unit apartment buildings or a warehouse or something like that while some lenders and Dodd Frank legislation look at a simple, single family residential that's non-owner occupied as a commercial dwelling because it generates income. 

In we do that.I think either of your options are nice, but I like not worrying about a tenant cleaning grout and the potential for leaks.Our bathroom walls are half tiled, nice vanity with as spacious a granite countertop as possible.

Sadly today’s   generation thinks everything should be just handed to them .

All income recieved has to go back into the IRA or I have to pay taxes just on the income generated by the investment property if I keep that money.

I wanted to have it cleaned and now I have to replace. 

Well as it turns out the tenant isn't staying... so while I am bummed at needing to fill two units right off the bat - I am glad to have a clean slate and to be able to dictate my own terms

If there was a Foreclosure Auction checklist that one must do for a successful clean transaction, how would it look like?

Tenants keep unit clean $35K MLS-2180280532730 Berrell - 3BR 2 story -  Long term tenants, $645/month, pay well each month, unit will need rehab (windows, floors, paint, probably kit/bath if desired) $32K MLS- 2180280611776 Republic Ave. - 2 BR flat with full basement, somewhat finished Vacant, needs rehab: Kitchen cabinets and counter are in good condition, unit needs flooring, paint, tub kid, 2nd bath in basement, upgraded elec. panel- $15K MLS - 218028374

We are both full time professionals and looking to generate passive income so we can slow down a bit and enjoy time with our new son.