Is there anything that would prevent me (legally) from beginning a bit of marketing for the second property?

The infrastructure isn't there & no matter how smart the new robot-car is, it won't prevent some teen in an '84 Buick from careening into them while texting.

I'm now receiving offers in the mail to reduce my CC debt.

You'll be looking at a higher FMR that will reduce your credits allowed for financing purposes based to some extent on the repairs you made.As to refinancing, the hard costs of your improvements will be considered as an equity achieved.

HOw am I reducing that when the exchange is complete?

I don't think anything prevents it legally, but I doubt there are too many lenders out there that would write another of these types of loans with another on the books (Have FHA and try to get Homepath, etc) 0% Down: NACA (https://www.naca.com) VA Loan (http://benefits.va.gov/HOMELOANS/index.asp) 3.5% Down FHA (http://portal.hud.gov/hudportal/HUD?

Also increases the chances of a federal entity having to finance a loan.4) Local Taxpayers- House keeps it value therefore surrounding property taxes aren't reduced due to a foreclosure.

Although I think of an unfinished basement as something that could have a ton of potential but is still not a space people would spend much time, with the price we had placed on the house, the fact that it didn't have a second coat of paint on the basement walls and floors must of prevented folks from feeling comfortable with buying the house.  

I am guessing there is also a clause in your option contract with prevents you from encumbering the property or mandating you cure immediately any encumbrance caused by you or be in breach of contract.

Even think about rentals on some for building monthly cashflow.To me, the benefit of real estate with a full time job and cashflow from rentals, it helps reduce your AGI and overall propel you towards even more cash.Also, look to join a real estate investors group/club in your area and learn more on this website as I read about others on here going from 0 experience to 100% full time REI than I could have ever imagined.