Have one rental but would like to improve the investment

[Robert White]

My mom has a small 2 bedroom, 1 bath (approx 900 sq ft) in an older neighborhood in Boise, ID. The location is good (near downtown, the university, parks, etc.), but the house is a mess: no foundation/crawlspace, needs a new roof, new siding, furnace, floor, kitchen, windows, back patio, etc. It does have a large shop in the back of the lot. The lot is narrow but deep with an alley in the back. The neighborhood is a mixed bag: mostly older homes with some in great shape and some like hers. She rents it for about $600/month. The renter doesn't always pay and does some of the maintenance himself for a discount on the rent. He's been in the place for move than 6 years. The place is completely paid off and probably worth $130,000-$145,000? There is an empty lot nearby for $100000. Overall, there are very few places for sale in the immediate area. 

I'm wondering how she could improve her situation? My thoughts are: 

1. tear down the house and build two narrow/deep houses on the lot and rent them. There are several of these in the neighborhood. The issue is how much would they cost to build vs how much would they rent for.  

2. Sell the house and buy 2-3 rentals to increase her leverage. As long as she could continue to net $600 a month, it would seem like a much better situation as the houses would be appreciating much more than her current one. 

3. Remodel the current house and increase the rent. The remodel would be extensive and she might be able to increase the rent to $850/$900?

Or maybe there's another option?

Thanks for any input/advice.