There is always an argument of cash flow markets versus appreciation markets, but given your circumstances it seems an appreciation market is a better wealth building tool for you.

Seems like this house has been neglected for quite a while.

And it's unlikely you're going private lenders willing to do 7-figure loans in the 6% range, unless you're willing to give a personal guarantee and have collateral to cover the full loan amount.Personally, I've done loans in this range, but only under circumstances where my risk of loss was literally about 0%. 

Unforeeen circumstances have occurred and I will no longer be living with him and will not be able to afford to live in the house by myself while I am on maternity leave, so I will be moving back home.

(not likely under the circumstances you've painted) Not sure what anyone can do for you at this point, but certain individuals here may be able to help you find the money to renovate properly @Ann Bellamy ?

I heard them say that they would cover a sudden leak but not a slow leak that had been neglected.

He'd accepted an offer of $120k before the other buyer pulled out.Link to Zillow ListingI know he's had quotes of $30k-$50k to put a new roof on and repair some structural damage due to neglect. 

They are legal almost everywhere (not Texas except in limited circumstances) so it is best to ask a real estate attorney in the area you want to do them.

You would probably be best served to speak to a CPA about your specific circumstance.

Appraised value means market value under normal circumstances, with adequate marketing time and exposure.