@John T.Looks like your father's position is that of a private lender or passive investor, as opposed to a partner.Even though he is your father, you really should define economic rules between the two of you. 

@Jim BrandtBefore talking about "losses", let's examine the economic substance of this proposed deal.For her. 

UAB has an economic impact on the state to the tune of $500k per dayConstruction Hub - Multiple international construction companiesFinancial Hub - There are many banking HQ's in BirminghamInfrastructure projects everywhere to expandSports Medicine originated in Birmingham (HealthSouth)I used to appraise prior to investing.

My recommendation is to choose cities in safe and economically diversified areas with above-average income and population growth.

I don't know Virginia but in North Carolina, I do think the Triad - Greensboro, Winston-Salem and High Point - offer  reasonable investment returns and have solid economic prospects.

Does it make economic sense to buy a house with private sewerage with the expectation that it will command a high value if changed to the city sewerage? 

At some point in the economic cycle someone comes along and offers to buy the property at a premium.

It is.So your small structure might not be economically reasonable.If you do decide to build an actual second dwelling, I recommend reaching out to @Josh Braun of Torque Development.

Understanding the economics drivers of the market can help you understand the type of people that are looking to rent in your market (i.e. pay you rent once you buy a property).After knowing and understanding your market & analyzing deals on a regular basis, you'll begin to understand how the process works of making an offer.

So in Antigonish, which does have a university and a hospital but isn't growing, the cap rates are maybe 8-10% while in Halifax, particularly the HRM, which has numerous economic drivers and IS growing, the cap rates are around 4%...i agree with you Jeremy about the low vacancy and tax rates in Antigonish.