I've never dealt with rent control, but I believe that has more to do with the rate of rent increases rather than forcing you to do maintenance/repairs (though there are certain repairs for safety, etc that must be done timely). 

Assuming your lease/license is in order, and no known defects that threaten health, life or safety, you can keep the SD plus interest in the amount of the unpaid rent.

There are way too many deals out there to count on appreciation to be your safety net.

Problem #1- After the demo, we realize that all of the Electrical is a fire hazard and there are no lights in any of the bedrooms or living room...

A thorough response as always.I have my own take, and as any attorney will say, this is not legal advice...For the asset protection purposes you need both (1) insurance and (2) properly structured company for litigation protection, an LLC/LP/etc.Insurance protects your from nuisance that occur on the property; i.e. slip and fallThe company structure protects your assets from litigation liability; i.e. gross negligence (health and safety, alleged known hazards, fraud in the sale of the property) as well as someone getting to your assets by suing you personally (e.x. you got into a car wreck that exceeded the coverage of your policy, now they can go after your assets)The due on sale clause is often a concern, but me and my colleagues view it as a very low risk for a number of reasons.

Nicholas,More than anything it does create a safety issue.

I know that a FHA appraiser will also be inspecting for safety issues.

I boarded up the home and fenced off the lot for safety, but made no other improvements to the land.The strategy and patience paid off last month with a sale to a developer who also purchased a larger, adjoining piece of land.My cost for the property, including taxes and other holding costs was a total of just under 70K.

I would say 500 per month is not much, but would consider that as a bonus and your safety gap if things go south. 

Fire safety?