They attract artists, creatives, and people who appreciate a vibrant urban lifestyle.Real Estate Appreciation (Historically): @Dan H. points this out with his bathroom addition.

In addition, you'll have depreciation recapture at rates up to 25%.

Would be great to reconfigure the lot lines on the two additional parcels so they'd both meet the minimum to build.

Supplement this far simpler entity approach by ensuring you have appropriate types and levels of insurance, you operate your business in a manner in which your conduct is not considered an exclusion in your policy, you work with licensed and insured vendors, you execute contracts with indemnification clauses with these same vendors/ require additional insured status &  maintain appropriate licensing and permits.

Many insurance companies do not allow adding a landlord as additional insured.  

So I saved an additional $2500 in taxes after the fact.

Most lenders who order appraisals are required to order them through a 3rd party AMC, which can add additional costs to the appraisal but ensures that there is no lender (Or borrower) bias in regards to the values.

However, there was a lot of additional paperwork, and I had the capital...So I just opted for the more traditional path instead.  

In addition to conventional loans and FHA loans, if either you or your wife are veterans, the VA also has a rehab program.I'd be happy to discuss my rehab experience both as an investor and as a mortgage broker, and at least help you think through your options. 

Long term goal is Property  Appreciation.Brand new single family home with 3000sqft (+ additional 1200sqft unfinished basement) on a 0.25 acre lot.