Because of this condition, my first question, is your assumptive ability to get this owner to leave ~$70,000 of his asking price on the table, considering he has obviously already taken into consideration the parity between the selling price of the house across the street by decrementing that price with your exact amount for repairs and rehab of $40,000. 

The unit's ceiling crack has grown throughout the entire living room diagonally.

The house is an SFR with an illegal in-law in an interesting but visibly improving area (City added bus rapid transit and diagonal parking).

Prices were less than replacement value and the CAD and USD were at parity. 

Look for cracks or unleveled streets (2) History: Has there been any flooding/earthquakes/blasting near this area that could have affected the foundation (3) Soil Sloping (4) Pooling of water (or signs of it on the ground from looking at the dirt) / poor drainageHouse: (1) Gaps at the corner of fascia trim (2) Diagonal cracks in the wall at corners of doors and windows (3) Cracks in the exposed grade beam of the house (4) Cracks in bricks and mortar (5) Look for bulging of any walls (6) Gaps between the garage door and the pavement at either side of the garage door Interior indications of foundation problems Windows & Doors: (1) Will not open or close properly.(2) Look at bottom of door/window to see if it is parallel with the door frame (3) Door frame cracks in corners (4) Sheet rock cracks in corners (5) Latches won’t secure in place (6) When doors are installed, typically they open and close effortlessly and the latch has no problem finding its home.Floors: (1) Unleveled (2) CracksConcrete slab: (1) Cracks (if slab is visible)Walls/Ceiling: (1) Cracks, look in corners (2) Horizontal and vertical lines, and eyeball to see if they are straight (3) Look on walls for painter’s tape and drywall compound, to see if they are covering cracks.

I said it was NW to SE, diagonally across and that makes picking remotely difficult.  

However from 5-10 properties on the reg. cash out refinance from fannie mae your LTV's are reduced by 5% as well so it depends on how many financed properties you have because this 5% LTV advantage could quickly come to parity.- Like another person mentioned you'll need an actual tenant in the property if you'd like to use rental income (on refi you need actual tenants, on a purchase you can use projected/hypothetical income).

I've actually seen it installed diagonally too.

The cold down there may be keeping the floors of the first-floor apartment cold, and if those floors are diagonal plank subfloors covered in thousands of pounds of oak tongue-and-groove flooring, as they would typically be in such a structure, that's a lot of thermal mass working against you to keep the first floor cold.You can minimize that from the top by laying down rugs or even carpeting the whole space, but if you can work from below and insulate the cavities between the floor joists with faced fiberglass insulation batts, that should help more.If you are willing to DIY that much insulation work, you can really change the math on the heat equation.

To add a little local color ... looking north toward Longmont, Erie, etc  can be a good idea ... however the morning commute from Longmont area toward Boulder (and evening commute from Boulder to Longmont) can be brutal esp on the Diagonal highway, for instance.