There was no toilet flange, so no firm seal to the pipe... 

I mean what are you going to do run water and plumb a toilet and tie into the existing sewer/drain field?

I've also rehabbed and remodeled residential homes for others. 

My strategy would be buy, remodel, rent and hold rather than flip them - looking at the cash flow instead of depending on appreciation.It would be difficult to manage a purchase of a property from a broad and tenancy agreement, but even more difficult to manage a remodel!  

I am am a GC in Portland OR and do upscale remodeling as my day job.

If you want a tear down, that means demo all walls, if you remain 1-2 walls (maintain only the studs) that would classify as a remodel.

Within 9 months of ownership we have already replaced the roof, hot water heater, remodeled the entire living room due to a cockroach infestation inside of the walls.

I wouldn't take on a residential remodel for a customer anymore - it takes too much time to get all the details perfect and I usually have a couple residential remodels of my own going at any one time. 

I have identified a home here in Anchorage I want in need of massive remodel, and I would like to try and use your strategy with them (but slightly modified: I would pay them off in a lump sum after the remodel work is done and I can get conventional financing). 

We are contemplating buying the complex, remodeling and renting them for long-term income.