Second, I know the tenant doesn't have excess funds as they are still dealing with the effects of hospitals, drs, etc.

Quote from @Kent Smith: I have read several threads on thisYour rent income will be erased down to zero by your deductions, so you do not owe more taxes.Also, you do not owe less, because you cannot go below zero.Good news: the excess loss is not wasted.

If your losses exceed your gains, you have a net capital loss for the year.Offsetting Other Income: If your net capital losses exceed your capital gains, you can use the excess losses to offset other types of income, such as ordinary income from wages, self-employment income, or interest income.

I couldn't build you something for $105/sqft but $200 plus site prep is excessive. 

Fine and violation for excess trash dumping 6.

I had a remediation contractor come out, and he told me the levels on the report is what he'd expect from a basement in Portland, and any amount of washing / bleaching wouldn't reduce the levels much long term as more moisture would enter the space up from the slab because concrete will always give off some moisture, and he couldn't really recommend much remediation. 

Back in our species earlier days, they were necessary for instant energy, but they are not needed as much in our modern world....yet we consume them in excess (well, most people do anyway)That old saying comes to mind - 'moderation in all things'.....and it applies particularly well to exercise and diet...

If you don't control the moisture level or stop the source it's going to come back.

. $40k seems excessive for this type of project.

For short-term rentals, the same would likely apply, assuming you offer what others don't AND you have a reliable way of screening for animals that cause excess trouble/mess OR pet owners who are not responsible.