I was thinking about buying the land (maybe it is 20-30k for the .25 acre lot), finding a builder in the area, and seeing if I could build a ~1,250 sq ft 3/2 single family house and see if I could make the math work. 

He is on the market to buy and has expressed interest in our rental.

I own one rental house in Cypress, but with the current market I have not been able to find another existing single family home to buy that looks like a good investment. 

Pending property prices in your market perhaps $25,000 is enough to buy a small rental house.

The attorneys I have worked with when buying a large apartment complex have all recommend one LLC for holding the property and one for managing it.  

Hey Pedro, if you want to build equity quicker, then you'll wanna buy properties well in the market value that likely will need to have some work done to them to get them fixed up.

She said that she knows that house is worth 300-400k (and she's right), but she told me to bring her a price that would work for me, and she would be willing to owner finance if we agreed on a price-she has done owner financing for other buys in past years.

Another route you could do is be a money partner for someone buying real estate that does cash flow like STRs or Co-living in Colorado or out of state or even partnering for flips. 

don't be afraid of better markets in ohio like columbus. depending on the capital allocation buying old houses and having to renovate is not the only way to drive value. build rent refinance repeat and build to rent are both very strong market drivers as well and you can traditionally get infill land in areas like columbus in much better locations than where you buy.

Another option would be to find someone to buy it and do a lease option contract with you.