I think your gut is telling you that that betting on appreciation as your only out is not the wisest choice. 

Worked out being the right choice in the end when we found the perfect property. 

And you could be out the cost of an inspection if they are really trying to hide something.Normally I hate the idea of “get it under contract and then negotiate further” but if the owner won’t let you into any units then you really don’t have a choice.

Looking for an expert opinion to help me make the right choice.

If there are pieces that are already falling apart, then your best choice is to put vinyl on top.

I would search by going to Trusted Choice and searching for an agent by the zip code of the property.

Building additional square footage will run $350-$500/sqft depending on your choice of finishes. 

And I would also say that you will get a lot of great guidance on here.Regarding vacancies, I think that is a personal choice given the circumstances.  

With our joint income, we’d have about 40k a year to invest.We’re pretty flexible people and don’t mind the lifestyle choice behind either option.

I will absolutely agree with you, in that if you  did what your numbers suggested, it'd be a poor investment choice, but hey, it might make sense to someone else!