I did the demo myself which took 1 weekend, have a contractor doing all the remodeling and I will finish doing the painting.

If I was looking at your house I'd be of the opinion that they both need a full demo. 

So my dilemma is whether it would it be more cost effective to demo the house entirely and build something more feasible for the area/size lot or fully renovate the home, and have the tiny home on this huge lot.

Do I demo and retile the whole bathroom or can I get away with just painting it?

My sister in law had a neighbor where the town had to come in and demo the house it got so bad.

This will come in the form of moving walls, opening spaces up, and the sub tasks associated with it (demo, framing, rewiring electrical, dropping new lights, etc.) 

ABQ is abundant with recent graduates, young adults, and a diverse socio-economic demo that are drawn to multifamily properties in all different neighborhoods.What I share your concern in is the leverage required for obtaining multifamily in ABQ.

The garage needs some structural work on the headers, and I'm not sure if the garage is attached securely to footings or not, so trying to figure out demo & new construction or convert the structure that is there.

I am in the throes of demo, and just starting to put it back together, but am wondering what tenants want (I do have a dock.

I have since done a full demo and renovation, converting it into a rental, two 3BR units and have some cashflow, but not long enough to qualify for the traditional W2/income loans.