The successful wholesalers I know spend $8,000 + per month on online marketing, SEO, SEM, landing pages, lead conversion, etc.  

A 1033 exchange is specifically for involuntary conversions and catastrophic loss situations like yours. 

Quote from @Arvand Sabetian: I think most others have already provided sound advice.I wanted to emphasis having a conversation with your tenants about the septic tank, not just a clause in the lease that you assume they'll read and understand.Many people are unaware of what they can be doing that causes issues to septic tanks (e.g., flushing the wrong items).Also, make sure you do a walkthrough yourself prior to filling the unit.

I try to have this conversation with my borrowers when i see finished basements on the scope of work.

Typically you can get a window egress installed for $3k-5k.Not aware of a Metro Detroit city that will allow the conversion of a SFR to 2-4 units in an R1 zoned area.- You can improve your search by only looking in R2+ zoned areas.- Will still be challenging to acquire a SFR at a low enough price to justify the cost of any conversion.Regarding Michigan property taxes, we have a one-page explanation document we'll share if you DM us. - The challenge in Detroit is that the city is "deliberately" keeping SEVs low to not scare investors away over property tax increases.

I do not seek these people out to talk about this specifically, but bring it up in casual conversation.

I recommend you do a google search for "real estate seller financing" and educate yourself through some blogs, then have a conversation to see if the two of you can agree on terms that work for everyone.Be sure to use an attorney to draft the documents, not the same one the seller uses.

I know this is an old thread but I wanted to see if you were able to get more knowledge on this basement conversion and what you ultimately decided?

Thank you again for the response I look forward to farther conversation!! 

Whether it's about deals, property management, or anything in between, I'm all in for a good conversation!