The rehab costs is a separate depreciable asset so figure out how you can depreciate those (depends on what was done).

Some work I would need done would be some tile replacement in a bathroom shower, a leaky sink faucet replaced, and kitchen fan replaced / fixed, and possibly (I am undecided here, depends on how much the previously-listed runs for cost) some framing done - My property was originally built as a single-family home and split into a duplex, but shutting off / sealing off a door, which is still a door.

A lot of the decision making for this opportunity would have to depend on your business plan and management strategy.

Regarding interest rates, all of the options you've listed are very reasonable depending on the circumstance. 

@Matthew WardAny payments coming into you for services should be considered revenue.Any payments going out should be considered expenses.It depends if your books are for internal purposes or if its for tax purposes.If its for tax purposes - Payments for properties should be classified as an asset.

It's just another way to have partners and keep everyone happy.It just depends on if you want the "experience" of doing high end renovations or if you are doing investing for the long term.

Depending on the sweat equity I gain I may sell the house or use it as my first rental property.

The amount of normal wear and tear may be significant or not much at all, depending on how long the tenant has lived there.

I can see it on RealtyTrac verifiably under pre-market and pre-foreclosure status (I don't put all my eggs in one basket, I know RealtyTrac has pros and cons in regards to its reliability, dependability and accuracy, like everything else on the internet...

@Wen Chuang, As well as being an investor in the Bay Area/San Francisco, I also run a property management company in San Francisco and what you're asking and describing unfortunately doesn't have a simple answer and falls into those all too familiar words of "It Depends."