2.) if I lease option it with a 2 year option will I be able to 1031, or not because my intent from the beginning of the lease option is to sell it?

Another option is you can pay her $500 to get out now and leave the place in good condition-do not hand over money until she's out and you've got the keys.She's also only renting a room, so there is nothing stopping you from moving in and occupying the rest of the house.

NACA was formed in 1988 and provides an affordable option for potential first-time buyers:✅ No down payment✅ No closing costs or fees✅ No mortgage insurance✅ No consideration of credit score✅ Below market fixed interest rateThere are several requirements to be eligible, starting with attending one of their workshops.https://www.naca.com

It is imperative that you speak with a lender that has been approved by the SBA in order to fully grasp the requirements and explore your options.Creative Financing: You may buy a property with little money up front by using a variety of creative financing techniques, including partnerships, subject-to transactions, and lease options.

Consequently, I am exploring the option of bringing in a local investor as a partner who will have a vested interest in managing the property effectively (skin in the game). 

If people don't understand what the requirements are and what the risks are and what the options are they cannot craft a scope of work that meets their goals.

Having someone with some skin in the game has been a good option. 

From there you could divide up the lots and build 4 new homes, or just build mutlifamily properties or a million different options.

So yes, you can fix and flip, or hold as a rental, or whatever.Thank you, so market auction is the best option in your opinion?

Like @Gita Faust said, I think an S-Corp is a better option for the management business.