Also the 1% rule is about as good as the rule thumb and not based on current conditions or current data. 

I have a little hard time estimating a fair market value given these conditions as I don't know how much to discount the value of the house with these issues presented.

And we rarely need to use them.Tenants sign and initial each page of the condition report at signing, we quickly go through the property and let them take as long as they want.Ideally at move out they would sign the condition report, but this is nor normally done. 

Aside from the standard BR/BA count and square footage, I always focus heavily on the listing pictures for any comps I pull in my area - finding a comp that's as close to your property's condition and finishes will give you the best apples-to-apples comparison possible.I also wanted to second @Tim Swierczek's input: nobody in Minnesota likes moving in the middle of winter.  

I have seen this in Milwaukee too many times, the only way to make it work is VERY hands-on.If you end up renting it in March for IDK net $200 the property will have lost a LOT more in the next 12 months just in condition vs what it looks like now (assuming that it is freshly painted?

Your great credit, cash in checking and savings, and property ready to cash flow are the basic conditions to qualify.

Also, make sure there aren't additional restrictions on the property condition, compared to a conventional loan. 

I really liked the condition of the property plus the seller financing helped seal the deal.

You may end up needing to go through the whole foreclosure process which can take a lot of time and cost a lot of money, and you may end up getting the property back in much worse condition than when you sold it, potentially with a squatter in it and months of lost rent, and in a worst case scenario you will be in a much worse position than if you had just sold it outright. 

In Europe, it is indeed possible to withdraw equity from a property through refinancing, but the conditions vary by country and lender.