Ok, another situation has surfaced from this incident.

I was scratching at the surface.

That makes me think that their is some risk based modeling that goes beyond surface level "common sense".2nd pt.- The 2 appraisals were BOTH by approved FHA appraisers.

I am thinking about removing both tenants asap and trying to get the smoke smell out but removing all carpet, whipping down down every surface, getting ducts cleaned and running an o-zone machine if needed.

The way to fix this would be to use a brick or masonry chipper or channeler and cut into the surface behind the furring strips to run the wire and daisy chain it.3.

I'm barely scratching the surface, but just a few thoughts.

I'm assuming it's not big if it's in an old, densely populated suburban area on a triangular parcel with only 10 surface parking spaces. 

This is a blacktop surface parking lot and the sewer drain is concrete.

If it's just the surface of the drywall scrub with bleach and use killz primer.

@Marci Stein   good rule of thumb is 50% which includes reserves and PM... so on the surface over time this is probably a break even property which is pretty common for A class.. you are banking on appreciation and your tenants paying down your mortgage so you create equity every month. there is nothing wrong with breaking even on A class and having your tenants pay your mortgage.