Can I use the lease he had after making modifications in the original lease.

Since this house is in a residential neighborhood with an HOA, any exterior modifications would require their approval.

It still on very rare occasions is done, and also on rare occasions for retrofit/modification work, you may still look for opportunities to support your structure/joist systems etc with the masonry - however sometime in the early 20th century pure masonry started going out of favor, for structures being built entirely with their wood/steel, and the masonry you saw was then basically an aesthetic detail that was 'tied' to the structure holding everything up. 

I suggest that you issue the man a notice to quit for serious nuisance, and list the two episodes - threatening a neighbor/visitor with a club (after all, that's what a piano leg is) in the parking lot, and screaming, cursing, and slamming doors at 1:40 AM in his unit, thus disturbing everyone else's peaceful enjoyment, and necessitating that the police come for a second time to deal with his behavior. 

Taxes are $510.30/mo. and Insurance is missing, that's $255/mo.Make those modifications and see if you like the results.

The lien is "upon any and all actions, claims, counterclaims and demands accruing to said injured person or accruing to the legal representative of said injured person [in case they die], and upon all judgments, settlements and settlement agreements entered into by virtue thereof on account of injuries given rise to such actions, claims, counterclaims, demands, judgments, settlements, or settlement agreements which necessitated such hospital care."

As a note investor it is not my goal to get the property back but to protect my investment which in many cases is keep the borrower in the property and try and work out a loan modification. 2.

I have no issue making lease modifications for the right tenants.

Is my understanding of the strategy flawed, or does it need major modification in most situations like this?

Usually when I flip a house one of the first things to do is restore it back to its original condition if there are modifications that are not up to modern construction standards.