You will be doing electrical and plumbing and you’ll need to meet egress and fire / safety requirements.

Most of the people I’ve worked with find some middle ground, keep some cash for safety, reduce non-income debt and allocate some to investing.  

Foreclosing ASAP is a way to get in front of that mathematical "certainty" and cut my losses.By contrast if 4% is a normal interest rate and 8% is "normal" annual appreciation, equity (ie, the safety of my position) is actually still going up each year.

Not only does the bsmnt. in it's current condition represent a potential health hazard and maintenance problem it also detracts from the value of the property and will complicate a future sale. 

I believe the 6 mo rent cash reserve is a good safety net.

Even if he wanted the house, if he wouldn't acquiesce to a simple request like that for the safety of the agent, imagine what a pain he would have been during the purchase process... 

In general, you can choose to address all of the major/critical items that involve safety and/or potential code violations.   

The trees outside aren't old enough to present a serious hazard to the sewer lines and the properties were all fitted with copper water lines to start with. 

Whatever the case, I agree that safety wise it's not a good idea to enter an occupied house plus I wouldn't want to put us in a position where anyone could accuse us of theft. 

You can't report tenants without some legitimate concern for the safety of them or others.