I painted it, redid the floors, put on new doors and hardware, fixed all the existing issues (leaks in roof, toilets not working, sinks leaking, water damage on exterior and upgraded the panel to a 220V) What was the outcome?

I'd just run your numbers on the new development i.e. how much can you get land for, building permits, water/sewer hook-ups, etc. 

The problem is that there constantly seems to be fees being charged to me an example of this is in the contract  there is an additional 100 dollars allocated to sewer and water that the tenant automatically pays every month with rent and anything outside of it should be billed to the customer (there is no specificed time when this will occur on the contract) but it appears to be billed to me and after speaking to IIP it's like they made up rule on the spot stating that after 6 months all of the additional utility fees would be billed to the customer and in the meantime I am being charged for it.

Commercial space rent in the area for similar properties is $3000-$4000/mo but property taxes annually are $25k+, insurance $6k+ and other expenses such as trash, water, heat & electric, etc. 

If you are in too low lying of an area, it may not be the wisest long-term play (unless we start building dwellings under water!)

If there is landscaping that you can add where, once established while you live there, requires very little maintenance and water, then do that.

Tenants pay for gas and electric, owner pays for water.

I said yes . at some point they moved the hose to the sump pump,  and last week I found out. 

I didn't get a lot of water and it was all manageable by the tenants, but given this happened I want to try to understand the reason and where to look (e.g., do I need to install a new/ better sump pump). 

You need to have enough money, probably in the $100-150k, amount to put the property under contract, and do the feasibility study on the property, Phase 1 Environmental, Property Drawings for roads, water sewer, and utilities, and have a completed budget so you know what your costs are.At that point you can go out and attract investors, I don't thing that developing raw land is necessarily cheaper than buying discounted finished lots.