Next steps near Seattle

[Derek Heinz]

Hi, BP. 
I've posted about my situation in the past, but here's the gist: I have a home near Seattle in a growing suburb. It was a fixer-upper when I bought it 5 years ago, and I have about 500k in equity in it. I also have a rental in Vancouver, WA (a Portland suburb right across the Columbia River). It is doing well and cash flows about $350 in a developing neighborhood. I should add that I'm 50 and have a decent job, but I'm burning out FAST! I want to retire soon.... 

My primary home outside of Seattle is next door to what has become a meth house. And I'm hoping to rent out my house in the next few months. It would be hard to sell my house for anywhere near what it's worth given the state of the house next door. The cops are there often, but nothing changes. That's a whole different story.... 

Cutting to the chase: I'm in contact with the owner who, until recently, was unaware of what is going on in her house. She is an older widow and generally very nice person. She is now very concerned and interested in selling to me. I proposed owner financing, but she still owes $185k. I think she must have tapped into the equity often. I have a HELOC, but I'm in not in love with the rates. Still willing to consider, though. Also willing to taking equity out of my primary with a refi.

If I were to try to buy it, I'm not sure it would pass any inspection. The roof is in horrible shape, and the house in general is barely intact. If I were to somehow buy the property, I'd likely have to tear down the "house". From there, I'd like to put in a decent modular and an ADU. Basically, I'd like to get two units on the property, and of course I'd be willing to house hack, at least for a while.

I think I've covered all the pertinent details. Now I'm just hoping you all can offer some much-needed, highly valued advice! Please share away; I'm all ears.