Otherwise, you may need to replace a water service (13-15k), electrical service (10-15k) and upgrade wiring (This is a tough one, but maybe an additional 8-15k inside).

I agree with the others here that say you need to have some skin in the game, if you are going to live there yourself, get an FHA loan rather than owner financing, you can get a 3.5% down loan, personally I do not love these as they require  PMI which is an additional expense, and you also need  bring additional funds for closing at least for taxes, title, attorney and transfer fees . borrowing from anyone else for the down payment, to include a personal loan from the bank is not a good idea, those again will be higher int. rate.

This is an additional step that would not be present for developing a lot where you are adding value.  

Additionally, Airbnb’s policies support hosts when guests do not comply with house rules.

Out of curiosity would anyone be willing to share any experience with non-paying renters who've vacated the property prematurely?

That being said an additional $500,000 would not stray me from this path. 

My best advice is find a place that has a few rooms with square footage to add additional rooms and an ADU.

The other option is to find a partner with some experience and use that on the loan.

What happens if you lose on it, you now have an additional liability, not just a loss of money.Are you planning on keeping the current property or exchanging it (1031) into something else?

Many investors budget an additional 5%–10% of gross rental income for CapEx, though this too depends on the property’s condition and the age of major systems.