John, I appreciate your vision for that property and your ability to see potential. I can't speak to the financial viability of the rental model you propose, but it's definitely worth carefully considering the cost of restoring that cabin. Despite its small size, the associated expenses--especially if you hope to add in a loft, address sewer/septic needs, and bring it up to code--may be significant. Would you be doing the work yourself or hiring it out? One's tolerance--and desire--to navigate some of these issues stands to vary greatly based on whether it's a true labor of love or something you hope to hire out free of worries.
With the cabin--before diving too deep into financial calculations--it would be good to get a clear assessment of its condition. Are there any logs that are rotten or insect-infested (this is can be especially common with the sill--i.e. bottom--logs)? Can you detect areas that have sustained damage from moisture over time? What's the condition of the chinking--and has it succeed in keeping moisture out of the house or simply channeled moisture onto the logs? What's the shape of the foundation? Etc.
If you're interested in learning more about the project you might have on your hands, I recommend The Classic Hewn-Log House: A Step-by-Step Guide to Building and Restoring by Charles McRaven. Although the book focuses on, as the title suggests, hewn log homes, much of its content stands to be incredibly helpful with a cabin such as the one in your photograph. Even if you don't plan to do any of the work yourself, it provides a quick and accessible overview of the issues you can anticipate needing to address. I hope this helps--and best of luck with your decision.
