That, in combination with the frequent requests, as well as trying to reduce the rent, is a play on their part to see how much they can control the relationship.

And although there can be plenty of money to be made there, especially if you are ready, willing and able to do some or all of the fix up work, they are a bit harder to sell because, again by definition, duplexes are generally purchased by investors, which reduces the number of buyers interested in purchasing them.

We are projecting to spend 8-9K per door to rehab the interior and exterior of the property, change the demographic to increase the rents to market, reduce expenses to achieve our investment goals.

Track everything you do (you are responsible for) and review your income and expenses regularly to discuss that to hopefully reduce your expenses and increase your income that will make your business grow.Be careful and consistent on what you do.  

With the rents going up at the current rate the buy and hold investors are reducing the inventory.

Now let's look at it from the tenants point of view ... they are renting for $465/mo and can drastically reduce their expenses by buying even a much nicer place ... then why don't they do that?

During the two years, you raise rents and reduce the operating expenses.

Go with the offer you feel fairly represents the amount of energy and time you spent putting work into your home.

(There wouldn't be any land title transfer but you'd need some kind of settlement such that the owner's mortgages and liens were satisfied, their property taxes reduced, etc.)

Also, as you pointed out, you can put down as little as 5% down with HomePossible, get a slightly reduced interest rate and Private Mortgage Insurance....as long as the property falls within a certain census tract.