People make the mistake of believing all debt can be wiped out through a bankruptcy and this is not true.I know you didn't mention this I am just throwing it out there for other people.I would get rid of and pay off your high interest rate loans.This will shift away the bad debt and free up more funds for the good debt that is working on producing income instead of taking it away.Not a fan of paying extra to the mortgage.You would just be trapping equity that would not be growing at the pace of inflation thereby diminishing the value of the equity.Instead if you put that money to work buying properties in one of the best buying cycles ever in real estate you can work to create long term wealth.You don't want to over leverage but you also do not want money sitting on the side lines.Where people mess up is to not buy correctly and over leverage themselves in a bad way.I am very conservative.I do not want to hold something that was supposed to be a flip,wholesale whatever because it was a mistake and now I am stuck with it for awhile.I would rather keep throwing out what will seem like to any seller (bank included) a low offer.Then over time build up a QUALITY portfolio and not a QUANTITY one.You can get quality and quantity if you are patient and make good decisions.The problem is many hit a home run and then go overboard and get strike outs.A few bad properties can almost sink the good ones or at best make you break even when you should be cash flowing like a monster.Watch equity firms that raise capital.They know what they want,how much they will pay,and they do not deviate from it.Over time they build a quality portfolio that can weather many storms that happen in the real estate cycle.If you buy incorrectly and the margin for cash (if everything goes right) is small you are asking for a disaster when the market takes a turn.I see mistakes daily as a commercial listing broker and an investor from other people.I always try to learn how they made a mistake and what happened.I only have one property a 20 unit currently.I am looking for more but only under the right conditions.I have looked at property for years.

A lot of people can get trapped in "learning" and never actually do anything.Denver's a tough town to cash flow in.

I know of no one personally that invests in section 8.

Yes they are cheap to buy, and yes you have tenants that are essentially trapped in that price range, but that doesn't mean that your property will be worth anything to anyone else OR that your tenants won't bounce around to other props/ cause you endless headaches. 

The home inspection revealed severe insect infestation, broken windows, and damaged masonry, plus there is a makeshift set of stairs leading to a loft.

Add in that the ADU typically has less advantageous finance options compared to other RE investments and traps significant capital and the ADU is often not a good choice.Note if you are a developer, contractor, skilled handyman, willing to act as GC, etc., the negative position will not be as substantial and could end up being a value add (but it requires much more work than a hands off ADU addition).Basically do your due diligence before starting down the ADU path. 

I've had to pay to replace them and costs can easily reach $15k or more.Any old house should be checked for signs of sill rot or insect damage.

so this will give you time to pay down the loan, the value to rise, and not get you caught in a short term trap. 2. 70% of ARV - repairs is the house flipper's formula.

Don't fall into any pitchman's trap about some obscure case or Public law argument lest you end up like Wesely Snipes.

I am not interested in section 8 or other bad-part-of-town investing; it is just not for me.