I would recommend seeking out a local landlord/tenant lawyer to review your business proposals with to make sure they conform with all local rules and regulations.

Your done with it, buyers will like it and you will be code conforming.

So there really isn't an equivalent to the conforming, good credit 80% LTV resdential 30 year fixed loan that is often quoted. 

It has been platted, but is non-conforming so it can only have one single-family dwelling at a time.

Ive been thinking about it these past couple of days and I think my first step will be to refinance the house at $70k to a 15yr conforming loan.

I may be wrong but I don't think that is an available option for standard Fannie/Freddie conforming loans, which has the benefit of being ~450+ basis points lower than private money lending. 

With that property in this market in Denver I'd have never accepted an offer with a 30day contingency in it, that offer simply wouldn't have even been something to consider.Take another example of a non-conforming property 20 miles away on the plains east of Denver, the property is messed up, total wreck, far from populations that would want to rent there, the farmer has had the property on the market for 2 years.  

Most however will conform and perform.

As a result the property equity cannot be $80K - it must instead be $40K or the bank call the loan as 'non-conforming'.  

Next thing you need to do is check the wiring for the property, you might need to rewire to conform to a multifamily property.